Durable goods sales have skyrocketed over the past year. Ongoing pandemic conditions have continued to depress consumer spending on services. As a result, a cash-flush market has shifted its spending over to physical products in lieu of experiences (purchasing cookware instead of going to a restaurant, exercise bikes instead of gym memberships).
This has been one driving force behind recent inflation and supply chain disruptions alike. Except for September, orders for physical consumer goods have increased just about every month in 2021. Transportation hubs are moving more products than ever before and factories have stepped up production, all while those centers are already overstretched due to covid. With demand rising more quickly than production and shipping can keep up, prices have begun climbing to match.
The resulting stress has shown up in freight ships anchored off the California coast. But it means big things for one sector in particular: Retailers. Action Alerts Plus writes:
“The October retail sales report [...] showed headline growth year-over-year of 16.3% for retail and food services, well ahead of the expected 13.9% increase," the AAP Team noted recently on Real Money.
"Stripping out food, and focusing on retail, those sales climbed 14.8% year-over-year with particular strength in food services & drinking places (+29.3% year-over-year), department stores (+27.6%) and clothing & clothing accessories (+25.8%) and gasoline stations (+46.8%)."
"Taking a closer look at the sequential year-over-year pattern for September and October, we see a nice tick up in non-store retail sales, food and beverage stores (including grocery stores), auto and other motor vehicle dealers, and building materials. That month-over-month improvement seems to confirm that supply chain issues have improved at least some in October, further supporting the figures we've seen from the likes of Ford Motor (F) - Get Ford Motor Company Report , Costco Wholesale (COST) - Get Costco Wholesale Corporation Report and others.”
The question, AAP writes, is how inflationary trends will affect this performance. Due to spiking demand and slowing production, energy costs have risen worldwide. The cost of food and other goods has gone up, creating some of the highest month-to-month inflation in decades (partially due to rising energy costs, which affect virtually every sector of the economy). Yet despite these questions, the current performance is clear: From AAP’s perspective, retail remains a big winner.