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September Retail Sales Jump Despite Supply Chain Hits, Inflation Surge

U.S. retail sales notched another surprise gain last month, Commerce Department data indicated Friday, as consumers continue to defy supply chain disruptions and a surge in inflation.

U.S. retail sales notched another surprising gain last month, data from the Commerce Department indicated Friday, suggesting supply chain disruptions have yet to hit spending in the world's biggest economy despite mixed gains in the job market and searing consumer price increases.

September retail sales rose 0.7% from the previous month to a collective $625.4 billion, the Commerce Department said, well ahead of the Street consensus forecast of a 0.2% decline, and 13.9% higher from the COVID-hit period in the fall of last year. The August total was revised upward to a gain of 0.9%.

Stripping out auto and gasoline sales, September retail sales were up 0.7%, the Commerce Department report noted, compared to a Street consensus of 0.5%.

This illustrates the strength of the American consumer, and we believe robust spending and borrowing will still continue in the future and that the pandemic did nothing to change Americans’ willingness to spend money," said Chris Zaccarelli, CIO at the Independent Advisor Alliance in Charlotte, North Carolina.

"The US economy is 70% reliant on the consumer and the doom and gloom forecasters who believed stagnant economic growth (especially in terms of the stagflation narrative) was ahead for the US are going to be surprised at the resilience of the US economy and we see higher equity prices ahead for this year and next year,' he added.

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U.S. stocks extended earlier pre-market gains following the data release, with the Dow Jones Industrial Average rising 275 points by late-morning trading the S&P 500 gaining 28.5 points.

Benchmark 10-year Treasury note yields moved to a session high of 1.567% following the data release while the dollar index was marked 0.05% higher on the session at 93.991 against a basket of six global currencies.

The retail sales gains belie both supply chain disruptions -- which have increased shipping costs by around 270% over the past year -- and a surge in energy prices which is feeding into faster-than-expected readings of consumer price inflation.

They're also coming amid mixed improvements in the job market, where unfilled positions are holding around 10.4 million, near the highest on record, despite the expiration of extended unemployment benefits over the first weekend in September.

In fact, around 4.3 million people left their jobs in the final month of the summer, according to the Bureau of Labor Statistics monthly Job Opening and Labor Turnover (Jolts) report earlier this week, while improving vaccination rates and rising wage offers have failed to tempt Americans back into the job market, with just 429,000 net new positions created over the past two months, easily the slowest gains for the year.

At the same time, U.S. consumer price inflation accelerated back to the highest levels in thirteen years last month, data from the Bureau of Labor Statistics indicated Wednesday, as surge in crude oil and energy prices continues to test the Federal Reserve's insistence that pressures will ease into the early part of next year.

Headline CPI for the month of September was estimated to have risen 5.4% from last year, up from the 5.3% pace in August and near to the highest levels since 2008. On a monthly basis, inflation was up 0.4%, the BLS said, with both tallies coming in below Wall Street forecasts.