As rent and food prices rise, retail sales held steady in September
NEW YORK (AP) — The pace of sales at U.S. retailers was unchanged in September from August, as rising rent and food prices reduced cash available for other things.
Retail sales were flat last month, down from a revised release. Growth of 0.4% in August, the Commerce Department announced on Friday. Retail sales fell 0.4% in July.
Excluding auto and gas station sales, retail sales rose 0.3%. Excluding gas sales, expenses increased by 0.1%.
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While the report showed the resilience of the American consumer, the numbers are not adjusted for inflation unlike many other government reports. In fact, grocery store sales rose 0.4%, helped by higher food prices.
Evidence that the Fed’s struggle to cool the economy may be setting in can also be seen, especially with big ticket items. Sales at car dealerships fell 0.4% last month, and shoppers continued to retreat from appliances, electronics and furniture, all categories that performed well at the start of the pandemic. Business at consumer electronics and appliance stores fell 0.8%.
Sales at clothing stores rose 0.5%, while business at department stores rose 1.3%. Business at restaurants rose 0.5%, while online sales grew at the same pace.
Neil Saunders, managing director of GlobalData Retail, said the report was “representative of a tightening economy and a shopper who is becoming increasingly discerning and cautious about what they buy”.
Consumer spending accounts for nearly 70% of US economic activity, and Americans have remained mostly resilient, even with inflation near four-decade highs. Yet soaring prices for everything from mortgages to rent have raised anxiety levels. Overall spending has slowed and increasingly shifted to basic necessities like food, while spending on electronics, furniture, new clothes and other non-essentials has declined.
“Even though people are employed and on paper seem reasonably comfortable, they don’t feel comfortable and they’re very concerned about what’s next,” said Joel Rampoldt, chief practice officer of retail at AlixPartners.
Inflation in the United States accelerated in September, with the cost of housing and other necessities putting more pressure on households, wiping out wage gains and all but guaranteeing that the Federal Reserve will continue to aggressively raise interest rates. interest.
Consumer prices, excluding volatile food and energy costs, jumped 6.6% in September from a year ago – the fastest pace in four decades. And on a monthly basis, core prices jumped 0.6% for the second straight time, defying expectations of a slowdown and signaling that the Fed’s multiple rate hikes have yet to ease inflationary pressures. . Basic prices generally provide a better picture of underlying price trends.
Overall prices rose 8.2% in September from a year earlier, down slightly from August, the government said in its monthly inflation report on Thursday.
This is a crucial time for retailers as they prepare for the holiday season, which accounts for an average of 20% of annual industry sales. Inflation is already changing shoppers’ habits, forcing them to turn to less expensive stores like Walmart and dollar stores and down the aisles, switching to cheaper brands.
Walmart and Target are among others offering earlier deals while others are offering new finance to customers.
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Conn’s HomePlus, a Texas furniture and mattress chain that caters to households at the bottom of the economic ladder, has launched a new layaway program that caters to the 20-25% of chain applicants who are not eligible for other funding.
“The ability (of buyers) to spend on discretionary spending is more constrained than it was before,” CEO Chandra Holt said. Sales of products such as luxury coffee makers and other consumer electronics have declined, she said. .
A slew of holiday forecasts from various research and advisory firms point to a slowdown in sales compared to last year, but adjusted for inflation, retailers could actually see a decline. AlixPartners expects holiday sales to rise 4% to 7% from last year, which was up 16%, according to its calculations. The National Retail Federation, the nation’s largest retail group, did not release its holiday forecast.
Janet Barnes, a 42-year-old College Park, Md. resident, says she is bargaining and going to cheaper stores for groceries as prices rise. Instead of Wegmans or Whole Foods, she is now heading to discount chain Lidl and said she is saving around 40% on groceries. Thrift stores replaced Nordstrom, she said.
“We’re creatures of habit,” Barnes said. “But it’s not a bad deal to see what else is happening – and to test something else.”
AP Economics Writer Chris Rugaber in Washington contributed to this report.