Retail sales hold up through COVID-wracked September

Even with COVID being at its worst in most parts of America last month, consumers have proven resilient, with demand staying strong. That was reiterated on Friday with the US retail sales report.

Consumers spent at a much faster pace than expected in September, defying expectations for a pullback amid pervasive supply chain problems, the Census Bureau reported Friday.

Retail sales for the month increased by 0.7%, against the Dow Jones estimate for a decline of 0.2%. Excluding auto-related sales, the number rose 0.8%, better than the 0.5% forecast.

Compared with a year ago, sales were up 13.9% on the headline number and 15.6% excluding autos.

That’s pretty good, and August’s increase was revised higher from 0.7% to 0.9%. Both are quite a bit above the rate of inflation for those months, so things are still moving along well overall, and it indicates that the Summer doldrums in retail sales may be starting to clear.

Dig into the retail sales report, and you’ll see there is quite a bit of variance. The type of stores that used to anchor malls in a prior time did very well in September, as did big box stores.

The bump in hobby stores is eflective of what happened in the first part of the pandemic, as people bought more items that they could use in their homes. It’s also noteworthy that the automotive sector had more sales for the first time in several months, which gives hope that some of the supply issues that we saw there are clearing a bit.

The one area of this report where we may be seeing the shadow of COVID is in bars and restaurants, which has seen sales and employment flatten out over the last couple of months. And the COVID-era jump in electronics/appliance sales has faded since Spring.

This also indicates that while consumer spending growth has certainly moderated from the big boom we saw as vaccinations and temperatures both rose in the first half of the year, the next COVID breakout hasn’t entirely shut down demand, and the strong wage growth of recent months should keep things moving as 2021 ends.

The question is what breaks first - the high demand, the higher wages, or the supply shortages. The answer will go a long way to determining what kind of consumer behavior we'll see in 2022.