Retail market: Supply issues could haunt the holidays after September sales surge


Ongoing supply chain issues could hamper consumers’ ability to spend during the upcoming holiday shopping season after better-than-expected retail sales in September, economists said.

Retail and foodservice sales rose 0.7% month-over-month in September after a revised 0.9% increase in August, according to US Census Bureau data released Oct. 15. That beat economists’ expectations of a 0.1% decline for the month, according to a consensus forecast compiled by Econoday.

Consumers largely spent more on goods than on services, economists say, reversing their early summer habits. Back-to-school shopping also boosted sales during the month. Rising inflation and supply chain backlogs, however, could erode these gains in the coming months.

“Demand for products is at an all-time high, it’s supply that’s shrinking,” Jason Stuckey, managing director of e-commerce service Linnworks, said in an interview.

Meanwhile, no retail companies filed for bankruptcy between late September and mid-October.

Retail sales

According to the Census Bureau, U.S. retail and foodservice sales hit an advance estimate of $625.42 billion in September, up from a revised $620.85 billion in August. Year-over-year, retail and food service sales rose 13.9% in September, with growth in all categories.

Retail trade sales, which exclude food services, were up 12.2% year over year and 0.8% from August. Sales of apparel and clothing accessories rose 22.4% year over year, while gas station sales rose 38.2% year over year.

Sales at electronics and appliance stores fell 0.9% month over month in September, while sales at motor vehicle and parts dealers rose 0.5%. On Oct. 14, S&P Global Ratings lowered its expectation for U.S. light vehicle sales to 15.8 million in 2021, from a previous forecast of 16.7 million sales. This will still represent a 9% increase compared to 2020.

Ongoing backlogs in the shipment of consumer goods likely dampened sales as consumers faced shortages on certain items, according to Jack Kleinhenz, chief economist at the National Retail Federation.

“Consumers remained active, but retail sales did not reflect a shift from goods to services as much as expected,” Kleinhenz said in an Oct. 15 statement.

Consumers are aware of dwindling supply, which means they are looking for immediate ways to get the products they want, according to Linnworks’ Stuckey.

“Back to school, combined with a deeper awareness of the impending storm of product scarcity, has contributed to the uptick we’re seeing in retail sales,” stuckey noted.

To help clear a backlog of cargo ships awaiting unloading, the White House announced on October 13 its intention to keep the ports of Los Angeles and Long Beach open 24 hours a day.

Still, it will likely take two to three years to fully recover from the supply chain impasse, according to Stuckey.

The safeguarding of supplies is likely to worsen as the holiday season approaches, said Joel Naroff, president and chief economist of Naroff Economics.

“With labor shortages rife, it’s hard to see how ports will be cleared any time soon,” Naroff said in an Oct. 13 research note.

Consumer price

Consumer prices rose 0.4% in September from the previous month, according to data from the US Bureau of Labor Statistics. Prices jumped 5.4% from the same month a year ago before seasonal adjustment.

Prices for new vehicles rose 1.3% month over month in September and 8.7% year on year. Used car prices were down 0.7% from August, but up 24.4% from September 2020.

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Employment in the retail sector was 15.4 million jobs in September, an increase of 0.37%, or 56,100 jobs, from August, according to the Labor Department.

Jobs at clothing stores rose 2.6% in September from August, while jobs at building material and garden supply stores rose 1.17%. Employment at motor vehicle and parts dealers rose 0.14%. Employment in food and beverage stores fell 0.4%.

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Probability of default

Home furnishings, a category that includes furniture and flooring manufacturers, was the retail sector with the highest median market signal one-year default probability at 8.9%. as of October 14, according to data from Market Intelligence. The scores, which represent probabilities of default within one year, are based primarily on the volatility of stock prices of public companies in the sector and take into account country and industry risks.

Default ratings for the Home Furnishings category fell 9.4% in mid-September. The median probability of default score for all retailers as of October 14 was 4.6%, down from 4.2% as of September 17.

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Retail bankruptcy filings came back to a standstill after a short wave of new filings in late August and the first half of September. As of October 14, 22 retailers had entered bankruptcy proceedings in 2021, less than half of the total for the same period in 2020.

Business bankruptcies could pick up again in 2022 after a slow period for the rest of this year, experts said.

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