Inflation fails to hinder U.S. consumers from spending

• Sales at U.S. retail stores, online sellers, and restaurants rose by a seasonally adjusted 1.7%.

• Stocks jumped after the announcement 

Rising inflation couldn’t deter consumers from spending in October as sales at U.S. retail stores, online sellers, and restaurants rose by a seasonally adjusted 1.7%.

Retailers have upped their expectations for the third-quarter results. Walmart reported higher sales for the third quarter. Meanwhile, other retailers such as Home Depot have predicted better than expected results.

READ MORE: Walmart raises forecast ahead of holiday season

On Tuesday, stocks jumped after the announcement of higher spending by consumers hit the Street.

Spending amid inflation

Even though the global economy is traversing through a rapidly aggravating inflation, gross margins at retailers continued to remain elevated in October. This means that people are spending more even when real wage growth is negative, especially in lower-income strata, as suggested by official data. 

ALSO READ: U.S. inflation reaches the highest level in 30 years

If this trend persists, consumption should get halted indefinitely, as reported by Bloomberg.

The savings rate is at its lowest level since December 2019. It has fallen significantly in recent months. Lower-income households have a relatively lower savings rate. Secondly, the use of revolving credit, which had declined during the pandemic, has increased in the last few months.

The Commerce Department stated in its report that spending rose sharply, by 4%, at online retailers. Electronics, appliance, and hardware stores made big gains as well despite the ongoing semiconductor chip shortage. Grocery-store sales rose by 1.1% while restaurant and bar sales remained the same. Sales at gas stations rose 3.9%, and auto dealerships witnessed a 1.8% gain in sales. 

Spending at sporting goods, hobby, musical instruments, and book stores, was up 1.5% and rose by 2.2% at department stores. Spending at pharmacies and clothing stores fell from the previous month.

ALSO READ: U.S. consumer spending rose slowly in September

(With inputs from Wall Street Journal)

Picture Credits: Razorpay