Interest rates and inflation remain high, and savings during the pandemic are running out. However, household spending in the United States remains strong.
On the 17th local time, the latest report released by the US Department of Commerce showed that retail sales in September increased by 0.7% month on month to $704.9 billion, far exceeding market expectations of 0.2%. The previous value was revised up to 0.8%, indicating a year-on-year increase of 3.8% in retail sales compared to the same period last year; Excluding car sales, core retail sales in September increased by 0.6% month on month, with an expected value of 0.3% compared to the previous value of 0.9%. This indicator showed a year-on-year increase of 3.2%.
Consumer spending accounts for over two-thirds of the US economy, and retail sales are considered an important indicator of consumer spending.
In terms of sub items, compared to the previous month, grocery stores were the sector with the largest increase in expenses, with sales increasing by 3% compared to the previous month; E-commerce and car dealers also recorded impressive growth, both achieving a 1.1% increase in sales; In addition, gas stations and catering also led consumption, with sales increasing by 0.9% month on month; Clothing accessories, electronic products, and appliances were a drag, with sales in both sub categories falling by 0.8%.
Compared to the same period last year, catering contributed the largest increase, with sales in this segment increasing by 9.2% compared to the same period last year. Online sales and health care followed closely, with sales increasing by 8.4% and 8.3% respectively.
Naveen Jaggi, President of the retail consulting team at Jones Lang LaSalle, told First Financial reporters that as inflation slows and retail sales continue to grow, consumers continue to spend on clothing, restaurants, and other aspects, indicating that despite high inflation, they still have resilience. Ian Lyngen, head of US interest rate strategy at Bank of Montreal, told First Financial reporters after the data was released that the report is impressive and provides the Federal Reserve with enough flexibility to continue its action against inflation.
Deterioration of consumer confidence
Consumers are struggling to cope with rising interest rates and prolonged high inflation.
On the 13th, the initial value of the University of Michigan Consumer Confidence Index for October in the United States was released, at 63, a significant drop from the previous value of 68.1, and the largest monthly decline since June 2022. In addition, inflation expectations have risen, with the inflation rate expected to rise to 3.8% in the next year, a new high since May, higher than the range of 2.3% to 3.0% in the two years before the epidemic, with a previous value of 3.2%; Long term inflation expectations - the expected inflation rate for the next five to ten years - rebounded by 0.2 percentage points to 3%, compared to the range of 2.2% to 2.6% in the two years before the pandemic.
Joanne Hsu, the director of the survey mentioned above, stated that consumer sentiment had not changed much in the previous two months, but fell by about 7% in October, with a decrease of about 15% in personal financial evaluation indicators, mainly due to a significant increase in concerns about inflation. He added that about 49% of consumers say that high prices are eroding their living standards, a significant increase from 39% last month and close to the highest level in history in July last year. Almost all groups have experienced setbacks in consumer sentiment, reflecting the continued impact of high prices, "Xu said.
Can the holiday season support consumption?
Jones Lang LaSalle conducted a latest survey of nearly 1100 American consumers in August, and the results showed that in the upcoming holiday shopping season, respondents plan to spend an average of $958 on holiday related projects, an increase of nearly 11% from $867 in the same period last year. Entertainment and experience have become clear consumption trends, with 22% of the consumption budget going towards entertainment and experience projects, such as dining out, watching performances, traveling, etc; The remaining 78% will be used for purchasing goods such as food and decorations.
Although the annual rate of the Consumer Price Index (CPI) has slowed to 3.7% in September, prices have increased significantly since 2019, reaching 21%. Consumers now need to pay more to purchase the same commodity, which has hit low-income groups more than high-income groups. Therefore, holiday spending plans vary greatly depending on income levels, "Keisha Virtue, a senior retail research analyst at the institution, told First Financial reporters
According to the survey, among respondents with an annual income of less than $50000, this year's shopping season budget is $633, 40% lower than the average, while respondents with an annual income of more than $150000 plan to spend $1781, 86% higher than the average.
On the 12th, data released by the Ministry of Labor showed that the year-on-year increase in CPI in September remained unchanged at 3.7%, while the core CPI increased by 4.1% year-on-year, lower than the 4.3% increase in August. However, the core CPI rose by 0.3% month on month for the second consecutive month in September, accelerating the increase compared to June and July.