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U.S. retail sales surged in October as Americans eagerly started their holiday shopping early to avoid empty shelves amid shortages of some goods because of the ongoing pandemic, giving the economy a lift at the start of the fourth quarter.
The solid report from the Commerce Department on Tuesday suggested high inflation was not yet dampening spending, even as worries about the rising cost of living sent consumer sentiment tumbling to a 10-year low in early November. Rising household wealth, thanks to a strong stock market and house prices, as well as massive savings and wage gains appear to be cushioning consumers against the highest annual inflation in three decades.
“It’s more important to look at what consumers do than what they say,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. “They are concerned about higher inflation, but they are still in good shape and are continuing to spend.”
Retail sales jumped 1.7% last month, the largest gain since March, after rising 0.8% in September. It was the third straight monthly advance and topped economists’ expectations for a 1.4% increase. Sales soared 16.3% year-on-year in October and are 21.4% above their pre-pandemic level.
Several of the top U.S. retailers this week have noted an earlier start to holiday shopping. While this could lead to declines in November and December, economists and retailers expect holiday sales this year will be the best in a while.
“Today’s numbers show that consumers are getting a jump on their holiday shopping,” said Matthew Shay, president of the National Retail Federation in Washington. “We continue to urge consumers to shop early and shop safely, and we fully expect this holiday season to be one for the record books.”
Retail sales are mostly made up of goods, with services, including healthcare, education and hotel accommodation, making up the remaining portion of consumer spending. The nearly two-year long COVID-19 pandemic has caused an acute shortage of labor, delaying deliveries of raw materials to factories as well as shipments of finished goods to markets.
October’s broad increase in sales partly reflected higher prices as monthly consumer inflation surged 0.9% in October, which boosted the annual rate to 6.2%.
Stocks on Wall Street were trading higher on the data and also as Walmart forecast a strong holiday quarter. The dollar rose against a basket of currencies. U.S. Treasury prices fell.
Retail sales: https://graphics.reuters.com/USA-STOCKS/movanldarpa/retailsales.png
Sales were led by motor vehicles, with receipts at auto dealerships advancing 1.8% after gaining 1.2% in September. The rise reflected the first increase in unit sales in six months, as well as higher prices. The tight supply of automobiles because of a global semiconductor shortage is driving up prices.
Sales at service stations increased 3.9%, boosted by more expensive gasoline. Online retail sales rebounded 4.0%. Receipts at building material stores advanced 2.8%. There were also increases in receipts at furniture outlets as well as sporting goods, hobby, musical instrument and book stores. Sales at electronics and appliance stores rebounded 3.8%.
But sales at clothing stores fell 0.7%. Sales at restaurants and bars were unchanged despite an ebb in COVID-19 infections, driven by the Delta variant. Restaurants and bars are the only services category in the retail sales report. These sales were up 29.3% from last October.
Economists speculated that either high inflation was forcing consumers to cut back on eating out or that spending had permanently shifted in favor of goods.
“If services spending has largely recovered, strong goods demand increasingly looks to be a structural shift in consumer preferences, rather than a temporary COVID-related outcome,” said Andrew Hollenhorst, chief U.S. economist at Citigroup in New York.
Excluding automobiles, gasoline, building materials and food services, retail sales shot up 1.6% last month after rising 0.5% in September. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Adjusting for inflation, retail sales are up at a roughly 5% annualized rate from the third-quarter average.
Core retail sales: https://graphics.reuters.com/USA-STOCKS/gkvlgdayzpb/retailcore.png
Consumer spending, which accounts for more than two-thirds of U.S. economic activity rose at a tepid 1.7% rate last quarter. Economists at JPMorgan boosted their fourth-quarter GDP growth estimate to a 5% rate from a 4% pace. Goldman Sachs raised its estimate by 0.5 percentage point to a 5.0% rate. The economy grew at a 2% rate in the third quarter.
The economic picture was further brightened by a separate report from the Federal Reserve on Tuesday showing manufacturing output surged 1.2% last month to its highest level since March 2019, after falling 0.7% in September.
“The economy has thrown off whatever lethargy it might have had in the summer, and it is growing quite strongly,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania.
Businesses are also making steady progress replenishing depleted inventories, which should help to keep factories humming and support the economy. Business inventories increased 0.7% in September, a third report from the Commerce Department showed.
Business invetories: https://graphics.reuters.com/USA-STOCKS/lgpdwnaznvo/businv.png
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)
Don’t put off a trip to the pumps too long as gas prices will likely start to rise again mid-week, says Dan McTeague, president of Canadians for Affordable Energy.
The price of a litre of gas fell by 11 cents per litre on Sunday — the biggest drop in one day since January 2009 — due to concerns about the Omicron variant.
“I guess the word is take advantage of it while you can,” McTeague told the Toronto Sun.
On Saturday, gas at GTA stations was priced at around $1.45.9 per litre compared to $1.34.9 on Sunday. McTeague added he saw it even lower on Sunday in some places at 1.29.9.
“I predicted it, I guess, Friday afternoon,” McTeague said. “I watched all day as the market collapsed on a very light trading day. With oil dropping $10 a barrel, gasoline futures down 30 cents a gallon, which led to the 11 cents per litre drop (Sunday) morning, much to the relief of those who took my advice and waited.”
McTeague said he expects the market to correct itself on Monday, meaning that prices will likely start climbing by mid-week.
“The timing couldn’t have been worse because you pick a day when there’s extraordinarily light trading as the result of most American traders taking a holiday on Friday, of course (given) (American) Thanksgiving was Thursday. Without being impolite, the real traders will show up (Monday) morning and get back to work.”
McTeague added that OPEC was initially slated to meet Monday but delayed that meeting until Tuesday. By Friday or Saturday, the cost of a litre could increase by four or five cents.
“It’s hard to say. There are conflicting reports out there suggesting that the (Omicron) variant isn’t as dangerous as first thought. So we’ll see what happens,” said McTeague. “I just think markets were really hoodwinked in the sense that the headline (about Omicron fears) drove the trades, and I think it doesn’t take away from the fundamentals that the world is undersupplied in oil.”
OTTAWA – The signs of an unprecedented labor shortage in Canada are glaring: hospital emergency rooms closed because of a lack of nurses, restaurants skipping meals and fewer Santas in malls.
In Ottawa, a “Help Wanted” notice in the window of Corazon De Maiz restaurant — like those in storefronts across Canada — has gone mostly unanswered since the recent lifting of public health restrictions introduced 19 months ago to slow the spread of the coronavirus.
The end of Covid-19 lockdowns brought droves of customers to the capital city eatery, but with kitchen staffing levels down, the restaurant has been unable to meet the demand for burritos and tacos.
“We’re suddenly busier, but we’re having to close early because my wife and I are exhausted after working all day,” owner Eric Igari told AFP.
One new hire worked three hours and quit, saying the job was too hard for not enough pay, Igari said.
“We’ve asked friends to pitch in, and even a few regular customers offered to help,” Igari said. Two customers actually worked a few shifts.
NO ‘HO HO HO’
Studies by the government and industry associations found that up to two-thirds of Canadian businesses are facing worker shortages, and claim the deficit is limiting their growth.
The industries most affected are health care, food services, manufacturing and construction.
According to the latest from Statistics Canada, there were a total of 1,014,600 job vacancies in September, including 196,100 in food services and 131,200 in health care — double the numbers from two years ago.
Trevin Stratton, a partner at Deloitte Canada, said factors contributing to the shortfall include an aging population leaving the workforce and lower recent immigration due to travel restrictions — which Canada lifted in September.
Some sectors are adapting through the use of technologies such as increased automation in manufacturing, e-commerce in retail, or allowing staff to work from home.
But in others, “many workers might not necessarily yet feel comfortable working somewhere where their physical presence is required,” Stratton said.
This is particularly true in the restaurant industry, which also shed workers fed up with the cycle of lockdowns and re-openings throughout the pandemic. “They’re now looking for more stability,” Stratton said.
With Christmas just weeks away, the trend has also impacted the supply of Santa actors usually hired for photos with children on their knee at shopping malls or professional mixers.
Jeff Gilroy of Just Be Claus said he’s turned down 200 Santa gigs in Ontario. After large gatherings were banned last Christmas, he told AFP, “people are looking to have a Santa to make it a more festive Christmas.”
Catherine Lacasse of the Professional Santa Claus Agency of Quebec said her province has ample Santas, “but we’re struggling to find enough elves.”
“In health care, we’ve seen an exodus, particularly of nurses this year,” Stratton said. “Some of that has to do with the stress of the job right now.”
Lachine hospital in Montreal was forced to close its emergency room at night due to a “critical shortage of nurses,” said spokeswoman Gilda Salomone.
Several others, she said, “are experiencing a major labor shortage that is limiting the quality and access to care.”
Observers have suggested simply raising salaries to lure workers.
But Jasmin Guenette of the Canadian Federation of Independent Business (CFIB), said this “isn’t an option for many small businesses still struggling to recoup pandemic losses.”
“We see things slowly getting back to normal, going out to restaurants, for example, and we think that means businesses are doing well. But that’s not the case. The impact of the pandemic was severe, and is still being felt,” he said.
According to a CFIB survey, the average small business in Canada racked up Can$170,000 (US$135,000) in debts over the pandemic. And an estimated 180,000 businesses, or one in six, are now “at risk of closing.”
Chez Mere-Grand restaurant in Montreal sought for 21 weeks to hire a cook and a barista. Its owner Romain Beiso explained that the hiring pool is smaller because many people now insist on a better work-life balance and job security found in other sectors.
“Our wages are not competitive because we cannot afford it,” he also acknowledged.
Over at Hotel Place d’Armes, manager Benoit Pretet worries about being short 25 staff going into the holiday season.
“The clientele is back,” he said, “but we can’t open all our rooms.”
© Agence France-Presse
SYDNEY, Nov 29 (Reuters) – U.S. stock futures led a market rebound on Monday as investors prepared to wait a few weeks to see if the Omicron coronavirus variant would really derail economic recoveries and the tightening plans of some central banks.
Oil prices bounced more than $3 a barrel to recoup a chunk of Friday’s shellacking, while safe haven bonds and the yen lost ground as markets latched onto hopes the new variant of concern would prove to be “mild”.
While Omicron was already as far afield as Canada and Australia, a South African doctor who had treated cases said symptoms of virus were so far mild. read more
“Another key difference is there are far higher vaccination take up rates globally now compared with when Delta emerged,” said Craig James, chief economist at asset manager CommSec.
“What the news on Omicron does highlight is the need for central banks and governments to take a cautious approach to removal of economic support and stimulus.”
Trading was erratic on Monday but there were signs of stabilisation as S&P 500 futures added 1.0% and Nasdaq futures 1.2%. Both indices suffered their sharpest fall in months on Friday with travel and airline stocks hit hard.
EUROSTOXX 50 futures rallied 1.7%, while FTSE futures firmed 1.3%.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) eased 0.1%, but found support ahead of its 2021 low. Likewise, Japan’s Nikkei (.N225) recouped early losses to be almost unchanged.
Bonds gave back some of their hefty gains, with Treasury futures down 16 ticks. The market had rallied sharply as investors priced in the risk of a slower start to rate hikes from the U.S. Federal Reserve, and less tightening by some other central banks.
Two-year Treasury yields edged up to 0.56%, after falling 14 basis points on Friday in the biggest drop since March last year. Fed fund futures had pushed the first rate rise out by a month or so.
The shift in expectations undermined the U.S. dollar, to the benefit of the safe haven Japanese yen and Swiss franc.
On Monday the dollar had steadied somewhat at 113.71 yen , after sliding 1.7% on Friday. The dollar index held at 96.190, after Friday’s 0.7% drop.
The euro was struggling again at $1.1276 , following its rally from $1.1203 late last week.
European Central Bank President Christine Lagarde put a brave face on the latest virus scare, saying the euro zone was better equipped to face the economic impact of a new wave of COVID-19 infections or the Omicron variant. read more
The economic diary is also busy this week with China’s manufacturing PMIs on Tuesday to offer another update on the health of the Asian giant. The U.S. ISM survey of factories is out on Wednesday, ahead of payrolls on Friday.
Fed Chair Jerome Powell and Treasury Secretary Janet Yellen speak before Congress on Tuesday and Wednesday.
In commodity markets, oil prices bounced after suffering their largest one-day drop since April 2020 on Friday.
“The move all but guarantees the OPEC+ alliance will suspend its scheduled increase for January at its meeting on 2 December,” wrote analyst at ANZ in a note.
“Such headwinds are the reason it’s been only gradually raising output in recent months, despite demand rebounding strongly.”
Brent rebounded 4.8% to $76.20 a barrel, while U.S. crude rose 5.2% to $71.71.
Gold has so far found little in the way of safe haven demand, leaving it stuck at $1,791 an ounce .
Reporting by Wayne Cole; Editing by Richard Pullin, Shri Navaratnam and Lincoln Feast.
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