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US: Strong Retail Sales Report Pointing to an Early Kick-off to Holiday Shopping Season 

Retail sales rose by 1.7% m/m in October, above the consensus forecast of 1.3%. September data, was revised up to an even stronger 0.8% m/m (from 0.7%).

Sales in volatile categories were robust, led by gasoline stations +3.9% m/m, which in turn reflects strong gasoline price growth. Motor vehicles and parts grew by +1.8% m/m, while sales at building materials & garden equipment stores rose by 2.8% m/m.

Sales in the “control group” used in calculating personal consumption expenditures, were up 1.6%. However, September’s gain was revised down to +0.5% from +0.8% reported earlier.

  • Within the group, the biggest contributors to growth were non-store retailers (+4.0% m/m), building materials retailers (+2.8% m/m), miscellaneous retailers (+2.8 m/m), and department stores (+2.2% m/m). Strong growth in these categories indicates that holiday shopping season got off the ground.
  • Not all categories grew on the month. Clothing & accessory stores (-0.7% m/m) and health & personal care (-0.6% m/m) led declines, continuing a pattern since the pandemic.

Food services and drinking places – the only barometer for the services sector in today’s reading – grew by a modest 0.4% in October.

Key Implications

Consumers are off to an early holiday shopping season, which may also prove to be a record setting. According to National Retail Federation’s annual winter holiday survey, shoppers plan to spend roughly the same amount on the holidays as last year, while the share of consumers who indicated their desire to shop early this holiday season jumped to almost 50% – the highest in the survey’s history. Some consumers may be hoping to avoid the stress of last-minute shopping or to take advantage of holiday sales, but a large number simply want to secure their purchases in the wake of supply chain challenges and reports of shortages.

The ratio of inventory-to-sales – the measure of how quickly an industry replaces its inventory – is below the pre-pandemic averages across all large retail sectors. With supply jam logs expected to prevail for the remainder of the year, inventory rebuilding will prove to be challenging, making last minute shopping risky this season. Add to this strong consumer purchasing power and you got hothouse conditions for higher retail prices.

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