Consumers show power with 1.9% increase in retail sales

Consumers show power with 1.9% increase in retail sales
Image by gonghuimin468 from Pixabay

Consumers show power in September with a 1.9% increase in retail sales, which analysts consider a healthy sign of the industry.

According to economists polled by Dow Jones, sales could rise by 0.7%, up from a 0.6% increase in August.

Without autos, the gain reached 1.5%, which also was more favorable than the 0.4% estimate.

The increase is attributed to clothing and accessories, rising by 11%, while music, sporting goods, and books rose by 5.7%. Electronics and appliances were the only major sector that posted negative, declining by 1.6% from the August levels.

Markets had a positive reaction to the news, with Dow futures indicating an opening gain of about 126 points.

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The figures follow concerns over the path of an economy damaged by the coronavirus pandemic. Consumers fuel about two-thirds of economic activity and they saved a lot in the second quarter, which saw GDP drop by an unprecedented 31.4%.

Meanwhile, economists predict that the number would turn around when third-quarter growth is released at the end of the month, with the Atlanta Fed’s GDPNow tracker hinting at a 35.2% increase.

This is deemed more than double any single-quarter growth returning to at least 1947.

Moreover, concerns are swelling that the fourth quarter could experience a slowdown as Covid-19 infections continue to spread. With this, the holiday shopping season will be an important factor for the type of momentum the US poses as the calendar enters 2021.

The huge gain in spending follows months of historically high savings as consumers stopped shopping due to Covid-19. The personal savings rate rose at 33.6% in April and was stable at 14.1% in August, the biggest pre-pandemic rate since June 1975.

“The strength in August sales is welcome, and consumers in aggregate have the resources — in the form of the huge increase in savings deposits built up since the spring — to finance a strong holiday season,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics. “The problem is the virus. Cases are rising at only a modest pace in the more populous states, but we can’t be sure that will continue, and the message from states where cases have risen to very high levels is that economic activity begins to suffer very quickly.”

A decline in electronics sales could be seen as a cause of a slowdown. The September 2020 total suggested a drop of 6.4% from the pace of a year ago.

Meanwhile, food and beverage sales remained flat for the month while furniture-related sales rose by 0.6%.

Motor vehicle sales became a crucial point of strength, increasing by 3.6% on the month and 10.9% from September 2019. That happened as prices for used cars and trucks increased by 6.9%, the biggest monthly increase since February 1969.

Holiday consumption

According to a new survey by Accenture, consumers will minimize in-store shopping for the holidays to lessen the risks to workers.

Findings show that people will opt for smaller gatherings and patronizing retailers that share similar values during the coronavirus pandemic. Accenture asked over 1,500 US consumers in August.

Most of the respondents (61%) said they will avoid in-store shopping to minimize health risks to essential workers.

The same figure stressed their interest in companies that uphold health, safety, and hygiene during these times.

Meanwhile, over 40% admitted they do not prefer retailers that have laid off workers or deducted employees’ benefits due to the outbreak.

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