September retail sales better than expected
As Covid-19 cases are now in a decline, we can expect to return to more normal behavior in the months ahead. KPMG Senior Economist Ken Kim offers his takeaways.
September retail sales rose by a better than expected 0.7% on a month-to-month basis sharply beating market expectations for a 0.2% drop. What's clear in the September report is that covert cases or delta in this case continues to impact consumer buying patterns with goods purchases rising when cases surge and services activity receding. With Covid cases now in the decline we expect to return to more normal behavior with the larger services sector improving in the months ahead and goods purchases moderating. Here are some good news, the latest KPMG holiday consumer pulse survey sure that 32% of respondents expect to do in-store shopping for Black Friday which is double the amount of respondents last year. With consumers excited to return to in-store shopping we expect to see a pickup in economic activity in the fourth quarter.
September surprise: Resilient consumers drive up retail sales
Despite rising prices, shoppers were ready to spend last month. As a result, September retail sales experienced a firmer than expected 0.7% increase (month-to-month), resoundingly surpassing market expectations for a 0.2% decline.
The surprise uptick indicates the ongoing impact that Covid-19, or more specifically the Delta variant in this case, has on consumer buying patterns. When cases surge, purchases of goods rise and service activity recedes. Indeed, food and beverage store purchases rose by 0.7% and clothing store sales increased by 1.1%. Meanwhile, spending at restaurants and bars remained subdued for the second month in a row as consumers slowly return to dining out. Such spending climbed just 0.3% in September after rising by 0.2% in August.
With Covid-19 cases now declining, we expect a return to more normal behavior with the larger services sector experiencing more activity as well as more moderate spending on goods.
Black Friday boon
As the holidays approach, shoppers share some good news. According to KPMG’s 2021 Holiday Consumer Pulse Survey, 32 percent of the 1,000+ consumers surveyed plan to definitely shop in-store on Black Friday, which is double the amount respondents that said so last year. With consumers excited to get back into stores, we expect to see a pickup in economic activity in the fourth quarter after a third quarter slowdown.