Despite higher prices, US consumers continue to spend a storm Business and Economic News

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U.S. inflation may rise to a 30-year high in October, but that hasn’t stopped consumers from going through a storm as Americans began their holiday shopping season last month.
Sales at the world’s largest economy retail stores, online and restaurants rose 1.7 percent in October compared to the previous month, the U.S. Department of Commerce said Tuesday. That was the biggest gain since March and marked the third consecutive month of a rise in retail sales.
Compared to the same period last year, retail and food service sales rose 15.4 percent in October.
Supply chain scandals, as well as commodity and labor shortages, are driving up prices for U.S. companies this year, while at the same time passing higher costs on to American consumers.
Last month, U.S. consumer prices rose 6.2% from the same period a year ago, the U.S. Department of Labor said, with the largest acceleration in consumer prices in three decades.
This is of paramount importance to the health of the U.S. economy, as consumer spending drives two-thirds of the nation’s growth. And some are worried that rising inflation could lower the engine of the U.S. economy.
Consumers tend to spend more when they have more confidence in the outlook for the economy and financial opportunities. Rising inflation and the perception that it is not doing enough to sustain it helped boost U.S. consumer confidence to a 10-year low in November, the University of Michigan said in its latest survey.
But with U.S. households still saving more than $ 2.5 trillion on the coronavirus pandemic, Americans managed to spend it faster than expected in October.
“Improvements in the Covid situation, easing supply limits in the automotive sector and early holiday shopping boosted purchases last month,” Gregory Daco, chief economist at the U.S. Department of Economics in Oxford, said in a customer note. “Homes were still willing to open their wallets in the face of high prices – inflated nominal sales figures – but there is growing evidence that the ability to buy higher inflation is eroding.”
Although wealthier families have a higher cushion of income to absorb inflation, low-income households are suffering particularly hard. Consumers can respond to higher prices by delaying purchases of non-essential products, but they cannot delay essential foods such as food, gasoline, heating and roofing.
Food spending earned only 27 percent of the household budget last year for low-income Americans, according to the U.S. Department of Agriculture.
One way for consumers to react to key prices is to replace their purchases with lower-cost options.
The nation’s and world’s largest retail store, Walmart, known for its cheap prices, said Tuesday that online sales and sales at its U.S. stores opened at least a year high of 9.2 percent in the third quarter ended Oct. 29, even as costs rose. He said the trade giant has taken over a larger share of the U.S. food market and more buyers are returning to its stores.
While consumers are looking for bargains to deal with inflationary storms, analysts still see the economic recovery on track, thanks to rising wages, improved labor markets and COVID-19 infections and cuts.
“As the economy moves to 2022, improvements in the health situation should boost consumer confidence, and strong employment recovery and strong wage gains should drive revenue growth,” Daco said.
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