US retail sales rise as consumers favour clothing over services

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US retail sales rise as consumers favour clothing over services

18-10-2021

US RETAIL SALES RISE AS CONSUMERS FAVOUR CLOTHING OVER SERVICES

US retail sales increased again in September as worries about the Covid-19 delta variant pushed consumer spending toward merchandise including clothing over services like dining, entertainment, or travel despite supply chain disruptions and inflation.

Overall US retail sales during September were up 0.7% seasonally adjusted from a month prior and up 13.9% year-over-year. That compares with increases of 0.9% month-over-month and 15.4% year-over-year in August.

Despite occasional month-over-month declines, sales have grown year-over-year every month since June 2020, according to Census data.

Clothing sales were up 1.1% month-on-month in September, according to data released by the US Census Bureau. Sales grew by 22.5% compared to the same period a year ago.

National Retail Federation (NRF) president and CEO Matthew Shay notes the retail sales data confirms the sheer power of the consumer to spend, adding the organisation expects this to continue.

“Despite persistent challenges related to the global pandemic, supply chain and labour shortages, retailers and their partners have shown resilience and ingenuity in getting the workforce, goods and systems in place to serve their customers and the communities where they operate. We welcomed the chance to collaborate with the Biden administration and industry partners this week to address supply chain and labour force issues. We have seen record imports this year and are confident that collectively we can work through these challenges to ensure a healthy and happy holiday season.”

NRF chief economist Jack Kleinhenz adds: “The reopening of the economy was interrupted by Covid-19 and consumer spending other than retail hit a speed bump toward the end of summer. Consumers remained active, but retail sales didn’t reflect as much of a shift away from goods to services as expected. That was a plus for retail because consumers still have a hyper-ability to spend thanks to wage and job gains and the household savings built up during the pandemic. In addition, some back-to-school spending may have spilled over from August into September because of school districts that delayed opening until after Labor Day. Overall, the September report is very promising for a strong finish for the year. Nonetheless, rising inflation and slower supply chains remain a concern. Spending might have been higher if not for shortages of items consumers are eager to purchase.”

NRF’s calculation of retail sales – which excludes automobile dealers, gasoline stations and restaurants to focus on core retail – also showed September was up 0.7% seasonally adjusted from August and September was up 11% unadjusted year-over-year. That compared with increases of 2.4% month-over-month and a 12.2% year-over-year increase in August.

NRF’s numbers were up 10.7% unadjusted year-over-year on a three-month moving average.

For the first nine months of the year, sales as calculated by NRF, were up 14.5% over the same period in 2020. That is consistent with NRF’s revised forecast that 2021 retail sales should grow between 10.5% and 13.5% over 2020 to between US$4.44 trillion to $4.56 trillion.

September sales were up in all but two categories on a monthly basis and up across the board year-over-year, led by increases at clothing, electronics, and general merchandise stores.

Clothing and clothing accessory stores were up 1.1% month-over-month seasonally adjusted and up 22.5% unadjusted year-over-year.

Sporting goods stores, meanwhile, were up 3.7% month-over-month seasonally adjusted and up 13% unadjusted year-over-year.

Greater emphasis on apparel

Neil Saunders, managing director of GlobalData, notes although many commentators are jittery about the trajectory of the economy, consumers dismissed those concerns in September as they continued their retail spending spree.

He says: “Total spend rose by 14.3% over the prior year and was up by 22% over the same period in 2019. In monetary terms, this equates to consumers spending $75.8bn more than they did in 2020 and $110.7bn more than they did two years ago. The outcome is especially pleasing because September of last year was a reasonably robust month for retail, which meant the sector was lapping a tough comparative.”

Saunders adds a lot of gains continue to come from a diversion of spend from services to spending on products.

“Consumers continue to travel, commute, and vacation less than they did pre-pandemic and the expenditure that would normally be made on these activities has found a new home in retail. Notably, the allocation of spending has changed over the course of the pandemic. Early on, the focus was on upgrading homes and while this is still the case, now a greater emphasis is being placed on personal indulgences in the form of apparel, beauty, and accessories. This is aided by the fact people are socialising and leaving their homes more than they did last year.

“The trends show up in the category numbers, with apparel stores growing by 22.5% – the best rate of growth of any core retail sector this month. Admittedly, inflation has played a role here as the levels of discounting and promotions are well down on last year and years that have gone before, but volumes are also healthy as consumers treat themselves to new garments for the fall and winter season. Department stores, which generally have a high proportion of their sales mix in apparel, are also seeing gains, with sales for the segment up by 21.4% over 2020.”

However, for all the good news, Saunders notes the numbers point to some slight notes of caution.

“The first of these is the trend of slowing growth which is now very apparent. While September growth was solid, it was the lowest since March. This shows that the elevated momentum will not continue indefinitely and that, over the medium term, growth will continue to trend down until it reaches more normalised levels. There might be some variation during the final months of the year if consumers decide to go on a big spending spree to celebrate the holidays, but this will be the exception rather than the rule.

“The second worrying sign is that some big-ticket purchases like automotive have softened significantly. Here it is difficult to dissect the impact of product shortages from that of consumers being less confident to spend large amounts of money, but the latter is certainly playing something of a role.

“The third trend to watch is inflation. This is not yet at a level where it is dissuading consumers from buying, but a cold winter, along with very elevated prices for electricity and heating oil and gas could erode consumer spending power.

“As retail heads for a strong end to the year, all these things are tomorrow’s problems. But they could well bring retail down to earth with a bump in 2022.”

By Just Style

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