US retail sales rose in October as many consumers began holiday shopping early to avoid any shortages amid pandemic-driven supply chain disruptions that are dominating businesses and shoppers this holiday season.

Overall US retail sales during October were up 1.7% seasonally adjusted from a month prior and up 16.3% year-over-year, according to US Census Bureau data. That compares with increases of 0.8% month-over-month and 14.3% year-over-year in September.

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

Clothing sales were down 0.7% month-on-month in October but up 25.8% on the same period a year ago.

National Retail Federation (NRF) president and CEO Matthew Shay notes retail sales data for October reflects the enduring strength of consumers’ finances and willingness to spend as the holiday season gets underway.

“The robust balance sheets of American households are being met by retailer preparation and hard work to provide products that consumers want at competitive prices. Despite significant challenges including supply chain issues, labour shortages, rising inflation and the Occupational Safety and Health Administration’s (OSHA) impending employer vaccine mandate, retailers are continuing to safely serve consumers online and in stores. Today’s numbers show that consumers are getting a jump on their holiday shopping. We continue to urge consumers to shop early and shop safely, and we fully expect this holiday season to be one for the record books.”

NRF chief economist Jack Kleinhenz adds: “October’s numbers highlight the retail industry’s ongoing hardiness now that we’re in the fourth quarter. Consumers remain in high gear moving into the last months of the year. While it’s difficult to parse out exact amounts, the figures reflect the combined effects of Halloween and early holiday shopping. Even though consumers may have begun shopping early to avoid inventory shortages, November and December are still when they do most of their holiday shopping, so much remains ahead of us.

“Concerns about high prices are weighing on consumer sentiment, but that has not held back spending. As it has for more than a year-and-a-half, Covid-19 remains a significant factor should there be an increase in coronavirus infections that could cause a pullback in spending.”

NRF’s calculation of retail sales – which excludes automobile dealers, gasoline stations and restaurants to focus on core retail – showed October was up 1.7% seasonally adjusted from September and up 10.8% unadjusted year-over-year. That compared with increases of 0.4% month-over-month and 10.9% year-over-year in September.

NRF’s numbers were up 11.3% unadjusted year-over-year on a three-month moving average.

October’s results come as NRF is forecasting another record-setting holiday season, with sales forecast to grow between 8.5-10.5% over 2020. 

For the first ten months of the year, sales, as calculated by NRF, were up 14.1% over the same period in 2020. That is consistent with NRF’s forecast that retail sales for the full year should grow between 10.5-13.5% over 2020 to between $4.44 trillion and $4.56 trillion.

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

Clothing and clothing accessory stores were down 0.7% month-over-month seasonally adjusted but up 22.7% unadjusted year-over-year.

Sporting goods stores, meanwhile, were up 1.5% month-over-month seasonally adjusted and up 16.5% unadjusted year-over-year.

Apparel a clear winner

Neil Saunders, managing director of GlobalData, notes retail has entered the golden quarter on a positive note with a 14.7% increase in overall retail sales.

“While the gain is shallower than those posted earlier in the year, it is almost identical to last month which shows the slowdown in spending has softened. This is good news for retailers as it suggests the prospects for the holiday are robust. That said, we also believe some holiday shopping has been brought forward into October as consumers try to beat the supply-chain crunch, so this may lead to a slight moderation of growth as we move into November and December,” he adds.

“The impact of inflation is playing more of a role, especially in categories like gasoline where sales are up by 45.3% over 2020. The same is true of grocery where around 63.7% of the 8.3% increase in sales is down to inflation. The core message that comes out of this is that inflation is flattering the growth numbers. However, despite this, underlying volumes remain robust, and consumers are buying way more stuff than they did last year and in 2019.

“That household budgets can absorb the shock of higher inflation comes down to several factors. First, savings remain elevated and there is a continued wiliness to spend down some of these reserves. Second, the continued benefits from policies like the Child Tax Credit programme are boosting the incomes of some households. Third, there is a continued migration of spend from services into products, which is a major beneficiary to the retail sector. Fourth, as we approach the holiday season, consumers are very much determined to spend what it takes to have a good time as they try to make up for subdued celebrations last year. All in all, this suggests that the retail sector will be able to weather the impact of higher prices…at least in the near term.”

Looking further ahead, Saunders says if inflation is not tamed, GlobalData sees it becoming more of a brake on underlying or real growth.

“Consumers are already adapting behaviours to cope, including trading down in grocery, and this could be extended to spending in other sectors as inflation starts to erode disposable incomes in a much more serious way. This is a particular risk if the weather turns colder and bills for household heating and fuel soar. However, this is very much an issue for 2022 rather than 2021, so we see it having far less of an impact on the near-term outlook.

“This month, on a sector basis, apparel remains one of the clear winners with sales through clothing stores up by 22.7% over the prior year as shoppers refresh their closets for fall and winter. Fewer discounts in the category have also helped to increase the proportion of products sold at full price.

“In terms of channels, October was a relatively weak month for non-store sales which rose by a shallow 7.4%. While this comes off the back of strong growth in the prior year, it shows that many consumers have reverted to shopping in stores – partly to avoid shipping issues and partly because they have greater confidence in in-person shopping from a health perspective. Overall, it puts pay to the misconception that online would continue to dominate once the pandemic abated.

“Overall, the prospects for retail look solid and, unless there is a surprise collapse in the next two months, this year will be one of the record books. However, there are a host of pressures next year that will make things much more challenging in terms of growing both the retail top and bottom lines.”

By Just Style