Economic Report: U.S. retail sales rise sharply again, but high inflation also means goods cost more

The numbers: Sales at retailers rose sharply in September in a sign that Americans are spending enough money to sustain an economic recovery — buy they are also paying higher prices because of high inflation.

Retail sales climbed 0.7% last month, the government said Friday. Economists polled by The Wall Street Journal had forecast a 0.2% decline.

Sales reportedly rose in most major categories including, oddly, auto dealers. Automakers can’t produce enough vehicles because of a global computer chip shortage and sales have slowed, but the September retail report showed 0.5% increase.

Even if autos are excluded, however, sales were still up 0.8%.

Big picture: Americans have plenty of money to spend because of high savings, government stimulus and a tight labor market in which wages are rising sharply.

Figuring out what to spend the money on is a problem, though. The surge in delta cases toward the end of the summer caused more people to spend less on services such as dining out, renting a hotel room or getting on a plane.

Yet many goods such as autos and consumer electronics are in short supply and that’s leading to sharply higher prices. Inflation in the U.S. is running at the fastest pace in 30 years.

Read: Inflation rises at 5.4% yearly pace, CPI shows, and stays at 30-year high

Also: High inflation to last awhile, Fed’s Bostic says, and it’s no longer ‘transitory’

The effect is to partly exaggerate the strength of consumer spending, the lifeblood of the U.S. economy.

“Higher prices for consumer goods have been acting to, well, inflate measured retail sales,” said chief economist Richard Moody of Regions Financial.

Market reaction: The Dow Jones Industrial Average

and S&P 500

were set to open higher in Friday trades.

This post was originally published on Market Watch

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