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Retail sales are increasing, signaling that consumers are willing to absorb inflation as the economy continues to recover.
On Tuesday, the United States Census Bureau announced that American retail and food services sales rose by 1.7% between September and October. Between August and September, sales rose by 15.4% from the same period in 2020.
The New York Times reported:
Retail sales jumped in October for the third straight month, the government said on Tuesday, as Walmart and Home Depot both reported strong results for their latest quarters. The reports bolster the view that consumers are absorbing higher prices and splurging on a range of goods, from electronics to home improvement projects.
The Wall Street Journal added that although improved sales are a positive sign as consumers begin holiday shopping, higher price levels are a driver of the sales increase:
The combination of strong demand, snarled supply chains, higher prices and an unbalanced labor market is making for an unusual holiday season where record sales may be accompanied by shortages and long waits for goods. Inflation may also start to cut into demand for consumers with lower incomes who may put off purchases due to price increases, economists say…
Retail sales figures aren’t adjusted for inflation, so some of the increase can be attributed to higher prices.
Indeed, many American companies have successfully passed inflation costs on to consumers by hiking retail prices. The Daily Wire reported on Tuesday that Tyson Foods — the second-largest meat and poultry producer in the United States — witnessed improved margins in their most recent quarter by hiking prices.
“The inflation we incur needs to be passed on,” explained chief financial officer Stewart Glendinning. “Some of the inflation for us has been substantial.”
Referring to input costs, Tyson CEO Donnie King noted that he could not “think of a single thing that has either stayed the same or gone down.”
Despite inflationary pressures, Biden administration officials have argued that the pending $1.75 trillion Build Back Better Act would help Americans cope with higher prices. Brian Deese — who directs the National Economic Council — told ABC anchor George Stephanopoulos over the weekend that “this bill is actually going to address the core costs that American families are facing in child care, in housing, in health care.”
“I know you’re hoping to pass it, but even if it does pass, it’s going to take a while for the benefits to kick in. So what can Americans expect in the short term? Is inflation going to get worse before it gets better?” Stephanopoulos asked.
“We have to finish the job on COVID. We know that the more that people feel comfortable getting out into the economy, going to movies rather than buying television at home, working in the workplace, the more we can return a sense of normalcy to our economy,” Deese responded, also citing the passage of $1 trillion infrastructure legislation.
An analysis from the Committee for a Responsible Federal Budget notes that the true cost of the Build Back Better Act may be $4.9 trillion due to a number of “arbitrary sunsets and expirations” currently written into the bill.