🏂Consumers on the Go

Retail sales were rosy as the US economy continued to make a strong comeback as more sectors of the economy gained traction with the opening of many businesses. As a result, retail sales rose more than expected to hit 1.7%, reflecting the consumers’ resilience in spending despite a higher inflation environment.

Compared to the gain of 1.4% seen last month, it hints that the economy is still on a solid foot. Without any surprise, the main bulk of the increase comes from online retailers, which saw a gain of 4%. Grocery also registered a rosy start as sales jumped by 1.1%. In contrast, we know the restaurant and bar sales are essentially flat.

📽Holiday season comes early

The exciting insight will be on the possible spending for the coming holiday season. It is expected that consumers may spend around $851 billion, which is a remarkable improvement from $777 billion or a 9.5% increase. We see mega-retailers such as Walmart preparing ahead of expected roaring demand and ordering inventories way in advance through the chattering of ships.

Indeed, there appears to be a general trend that retailers are expecting consumers to shop early. This bodes well for the general market sentiments. Retail stocks have generally performed well for the year. For example, the XRT (SPDR S&P Retail ETF) rose 60%, while S&P 500 gains of 24% seem pale in comparison.

💰Deep in the Pocket

We do not see signs that consumers are paring their purchases. On the contrary, consumers are willing to spend more than before the pandemic as some jobs appear to be higher pay to retain staff. Wages and salaries were the biggest motivators in consumer spending, as shown in economic data.

Although Pika World does not see inflation in the current context as a negative spark, the persistent long-term increases could encourage workers to find greener pastures and the cycle of job-hopping for higher salaries plays on. While wages do not always push price inflation, there is substantial concern that wage inflation can contribute to overall inflation.

So what’s the transitory story? It is simple. The case is for goods expenditure to decline in the future and service spending start to moderate. This presents a cooling-off pressure on the supply chain. However, Pika World does not think it is happening anytime soon.

📮What’s on the menu today?

At 9.30 pm, we will have the Initial Jobless Claims, which we expect to drop to 260K from 267K in the prior period.

The Philadelphia Fed Manufacturing Index for Nov is expected to notch slightly higher to 24.0 from 23.8 in the prior period at the same time.

It is 18 Nov, Thursday, at 7.42 am in Singapore and 7.42 pm in New York. Economic data continues to drive the outlook of the market. Pika World wishes all an energetic week ahead!