SUMMARY: (Via the WSJ) American consumers spent more at the start of the holiday shopping season, brushing off concerns about higher prices at retailers last month. Sales at U.S. retail stores, online sellers, and restaurants rose by a seasonally adjusted 1.7%in October compared with the previous month, the Commerce Department said. Consumers continued their stepped-up spending despite constant Covid-19 fears and inflation concerns.
The elevated spending levels suggest solid holiday sales this month and next. Consumers have said they are worried about inflation, which hit a three-decade high last month but planned to continue spending.
Consumers are spending, brands are making higher profits, but they’re angry at high prices. Why? Because they have more money, but that more extensive bank account doesn’t go as far. The average price for a new car hit $45,000, and the cost of meat has increased by over 12%.
So why are they spending? Because they want to get back to a level of normality after being scared by COVID. I expect this holiday season to be robust, but many people are going to learn that the present they wanted for someone is out of stock. Retailers are telling consumers if they see that product they want to buy, then buy it now before it’s gone.
It’s going to be interesting when brands, who raised prices, report record profits next year. Will consumers take their revenge by leaving the brand, or will they stick with their favorite brands despite making a ton of money?
I feel inflation will taper off and that what we will have left is an economy where people are making more and paying more for goods and services. Some brands are going to learn that their brand equity was a lot less than they had believed as customers defect to other brands.
One area that seems to still be on fire is the housing market. Here in SW Florida, home prices were averaging 30% more than a year ago, and condos in some markets that went for $250k are now going for over $400k as builders struggle with supply costs.
Consumers love to complain and assign blame, but the fact that they are still spending money shows that a lot of talk about inflation is hot air driven by Republicans who see it as a weak point. Americans have more money in savings than ever before, and they’re starting to charge more purchases showing a level of belief in their jobs and future income.