US Retail Sales at All-Time Highs, but Consumer Sentiment Hits 10-year Low

By Benzinga
November 19, 2021 Updated: November 19, 2021

Investors reacted positively to a strong U.S. retail sales report on Tuesday, but there has been a historic divergence between consumer sentiment and consumer behavior.

The Numbers

On Tuesday, the Commerce Department reported U.S. retail sales grew 1.7 percent in October, ahead of analyst estimates of 1.5 percent growth. The stronger-than-expected spending numbers come the same month the consumer price index jumped 6.2 percent, its highest growth since the 1990s.

Meanwhile, the University of Michigan Consumer Sentiment Index fell to 66.8 for November, its lowest level in a decade. Consumers are concerned about the negative impact inflation could have on their future spending and savings.

Why It’s Important

Core inflation, which excludes volatile food and energy prices, was up 6.2 percent in October, its sharpest increase in 31 years.

Fuel oil prices were up 12.3 percent month-over-month and 59.1 percent compared to a year ago. Used car prices were once again a major inflation driver in October as well. Used car and truck prices increased by 2.5 percent in October and are up 26.4 percent over the last 12 months.

At the same time, one in four Americans say they have reduced their living standards because of price increases, while half of American families expect a net reduction in real income over the next year.

The Labor Department reported that U.S. wages grew 4.9 percent year-over-year in October. Unfortunately, it also said real wages after adjusting for inflation were down 0.5 percent from September to October.

Benzinga’s Take

The divergence between retail sales and consumer sentiment may also lie in the growing divide between the wealthiest Americans and the rest of the country. The SPDR S&P 500 ETF Trust is now up more than 110 percent from its pandemic lows, generating billions of dollars of wealth for American millionaires and billionaires. The average American is clearly deeply concerned about the economic outlook, but wealthy Americans with the most spending power may be spending more than ever.

By Wayne Duggan

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