Retail sales rose in September, defying inflation and supply woes

Retail sales rose in September despite rising prices and supply shortages, according to data released Friday by the Census Bureau.

Sales by retailers, including restaurants and bars, not adjusted for inflation totaled $625.4 billion in September, rising 0.7 percent from August’s revised total of $620.9 billion. The increase defied the expectations of economists, who projected sales to decline as supply chain snarls continue to raise prices.

“Consumers returned to in-person with back-to-school shopping in September after the Delta variant caused them to pull back in August. Delays to shipping items bought online are motivating a return to in-person shopping,” wrote Yelena Maleyev, economist at Grant Thornton, in a Friday analysis.

Stores that sell sports equipment, musical instruments, books and hobby products saw the biggest increase in September, with sales rising 3.7 percent last month after falling 3.3 percent in August. Superstores and other general merchandise sellers saw a 2 percent increase in sales last month, while online retail sales rose 0.6 percent after a sharp 5.7 percent-jump in August.

Only electronics and appliance stores and health and personal care stores saw sales fall last month.

Economists expected auto sales to continue to fall sharply as backlogs and chip shortages drastically reduced the supply of new cars and trucks on the market. While sales actually ticked higher by 0.5 percent, they fell when adjusted for inflation, Maleyev wrote.

“We are emerging from the Delta-induced lull in the third quarter but now are facing much higher inflation and goods shortages, which will constrain spending for the fourth quarter,” Maleyev wrote.

“Supply chain disruptions will not be resolved quickly as retailers scramble to stock up for Christmas.”

Ports, transportation companies, factories and suppliers have struggled for months to meet growing demand unleashed by progress against the pandemic. While consumer spending has rebounded swiftly from the onset of COVID-19, the supply chain has yet to recover from layoffs and shutdowns from earlier in the pandemic and have faced more grueling setbacks thanks to the delta variant.

The emergence of the delta surge in late July also shifted consumer spending in the U.S. away from services that had been limited by health concerns and back toward goods purchases popular amid shutdowns.

“Stepping back from the month-to-month noise, it’s important to appreciate here that we positively want spending on goods to weaken, relative to services, because the current situation … is a deeply abnormal consequence of the pandemic,” wrote Ian Shepherdson of Pantheon Economics in a Friday preview of the report.

“Spending on goods remains hugely elevated, while spending on services is still deeply depressed. A shift in the balance back in favor of services would be a clear sign that normalcy is returning as Covid fades away. We hope and expect that this shift will be clear and substantial across the fourth quarter.”

President Biden and administration officials are racing to repair supply lines and clear backlogs as inflation rises and holiday shopping season approaches. The president announced Wednesday that UPS and FedEx, along with the Port of Los Angeles, would begin operating 24/7 to work through container and package pileups. The administration is also exploring ways to recruit more truck drivers to fill a pre-pandemic shortage that has been exacerbated by the post-vaccine rush of demand.

Even so, experts say there is little the U.S. can do on its own to solve a global problem driven in part by shutdowns across the world. While Republicans have sought to blame Biden for causing the supply snarls with a $1.9 trillion stimulus plan in March, other wealthy nations have experienced similar issues.