Retail sales and runaway inflation

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E-commerce sales hit a record high. Sales at gas stations and electronics stores fell as prices fell. Used car dealers have faced a buyers’ strike, new car dealers have supply shortages. Grocery store sales rise on skyrocketing prices.

By Wolf Richter for WOLF STREET.

First, retail sales, reported today by the Commerce Department, are based on revenue, obtained through a survey of approximately 5,500 retail businesses, by retailer category. This is retailer revenue data, from a business perspective, not a consumer perspective. This is an indication of the quality of earnings of these companies. And in a moment, we’ll touch on a billion of these revenue charts by retailer category.

“Retail sales” not “Consumer spending”: The latter is reported about two weeks after retail sales, and my analysis of “real” inflation-adjusted consumer spending on durable goods, non-durable goods and services is here. Until August, consumers spent more than inflation.

“Retail sales” here follows sales of goods, not services, but runaway inflation has shifted from goods to services – and in services, inflation is raging at the worst rate since 1982.

Inflation raged in services and cooled in goods on a monthly basis in September. Food prices have surged again – and we’ll see that in grocery store sales in a moment. But gasoline prices have fallen and sales at gas stations have plummeted. Used vehicle prices fell, new vehicle prices rose, but at a slower pace. Electronics prices have fallen. The CPI for durable goods – new and used vehicles, appliances, consumer electronics, sporting goods, furniture, etc. – fell in September compared to August (all my details on inflation are here). For many retailers, price increases are now harder to push through and enforce.

The headline CPI rate therefore cannot be applied to retail sales. Even if you try to apply the CPI of various goods categories to retail sales, you will fail because the retail sales are by retailer category, not by product category, such as “general merchandise retailer”, which includes Walmart, which sells a wide range of product categories. A few retailer categories are close to product categories, such as “new and used car and parts dealers”, or “food services and drinking places” or “gas stations”. But gas stations sell all sorts of other products, including sodas and junk food, and the “gas station” retail sales category counts sales of all products, not just gasoline.

After price declines in many categories of goods, total retail sales was flat in September compared to August at $684 billion, seasonally adjusted, and was up 8.2% from a year ago. Compared to September 2019, retail sales increased by 32%.

Sales at dealerships of new and used vehicles and parts, the largest category, edged down 0.4% in September from August to $128 billion, seasonally adjusted, but was up 5.6% from a year ago and 23% compared to September 2019.

Sales increases since 2019 have come from much higher prices for new and used vehicles, on much lower volume as the industry has had huge supply issues.

Used vehicle prices have fallen from their insane peak, and there is now plenty of supply on dealer lots as price resistance has finally set in. The number of used vehicles sold decreased by approximately 15% compared to 2019.

Prices for new vehicles continued to climb in September. Inventories of full-size trucks, which sold out last year and earlier this year, are increasing, and some dealers are overstocking and taking advantage of deep discounts. Smaller, fuel-efficient vehicles are sold out and waiting lists are long, including for electric vehicles. Thus, unit sales of new vehicles – down 19% in Q3 compared to Q3 2019 – are not yet constrained by demand but by supply.

E-commerce sales and other “non-store retailers” rose 0.5% to a new record high of $109 billion, seasonally adjusted, up 11.6% year-over-year and 71% from September 2019, as the shift in sales from physical stores to online sites continued unabated.

Included here are sales made through the e-commerce operations of brick-and-mortar retailers, as well as stalls and markets:

Food and Beverage Stores: Sales, at $79 billion, rose 0.4% for the month, as the CPI for “food at home” – which largely reflects food purchased from grocery stores – rose 0 .7%. Year-over-year sales were up 6.4%, about half the rate of the CPI for “food at home” (13%). Compared to September 2019, sales jumped 24%:

Food services and drinking places: Sales rose 0.5% in September from August, and 11.4% year-on-year, to a record $87 billion. This increase largely reflects inflation: the CPI for “out-of-home food” – restaurants, vending machines, cafeterias, sandwich shops, etc. – jumped 0.9% in September compared to August, and 8.5% year-on-year, the worst since September 1981.

Compared to September 2019, sales increased by 33%.

General Merchandise Stores: Sales rose 0.6% for the month and 4.1% year-over-year to $59 billion, up 21% from September 2019. Walmart and Target are among of this category, but not the department stores:

Service stations: Sales fell 1.4% for the month, the third consecutive monthly decline, to $63 billion, the lowest since February, as the CPI for gasoline plunged for the third consecutive month and is down 24% from the peak in June. Sales were still up 21% from a year ago and 48% from September 2019.

Gas station sales include all other goods they sell, such as food, beverages, motor oil, and other things. The fall in gasoline prices may have been moderated by price increases for these other commodities.

Stores of building materials, supplies and garden equipment: Sales fell 0.4% for the month to $43 billion, but were up 9.7% year-over-year and 38% from September 2019:

Clothing and accessories stores: Sales increased 0.5% for the month and 6.4% year-over-year to $26 billion, up 18% from September 2019:

Miscellaneous in-store retailers (including cannabis stores): Sales fell 2.5% for the month to $15.6 billion, but were up 8.2% year over year and 41% from September 2019:

Furniture and home furnishings stores: Sales fell 0.7% for the month to $12 billion and were up less than 1% year over year. Compared to September 2019, sales increased by 17%:

Department stores: Sales rose 1.3% for the month to $11.6 billion, and were up 1.8% year-over-year and 4.8% from September 2019, sharp price increases that boosted sales.

Since 2000, sales have fallen by 42%. Department store sales have shifted from malls to the Internet, including on the e-commerce sites of the few remaining department store chains:

Countless department stores and department store chains, from Sears to Descendants, have filed for bankruptcy and have mostly been liquidated. Department stores were once the iconic place where Americans shopped. Today only a small number of chains survive, such as Macy’s, and even they have been closing many stores every year for many years, and many malls, those that have not yet closed, have closed department stores as anchors.

Americans have discovered that anything you can buy in a physical department store can be purchased online, including on that chain’s website.

In the early 1990s, department store sales accounted for about 10% of total retail sales. In February 2020, just before the pandemic, they were 2.4%. In September 2022, they were only 1.9%. On the way to insignificance:

Sporting goods, hobby, book and music stores: Sales fell 0.7% for the month to $9.2 billion, but rose 3.7% year-over-year. The CPI for sporting goods rose in the month, but fell 1.1% year-on-year. Compared to September 2019, sales increased by 38%:

Electronics and appliance stores: Sales fell 0.8% for the month and 8.6% year-over-year to $7.4 billion, and even down from September 2019. Retailers in this category are facing particularly steep price drops for consumer electronics. In September:

  • Consumer electronics CPI: -0.6% month-on-month; -10% year on year.
  • CPI devices: -0.3% month over month, +1.7% year over year

In this category are only specialized electronics and appliance stores, such as the physical stores of Best Buy or the physical stores of Apple. It does not cover sales of electronics and appliances at other retailers, such as Walmart, and it does not cover online sales of electronics and appliances:

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