Rising prices flatter US retail sales

US retail sales unexpectedly rose in September in part as more expensive motor vehicles boosted receipts at auto dealerships, but there are fears that supply constraints could disrupt the holiday shopping season amid continued shortages of goods.

Given the partial lift from inflation, the surprise increase in retail sales reported by the Commerce Department on Friday did little to change economists' expectations that consumer spending probably stalled in the third quarter. Inflation-adjusted sales, which rose moderately last month, are what is included in the calculation of gross domestic product.

"The solid retail sales report reflects both consumer resilience and escalating prices," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "The main concern now is that supply-chain disruptions and microchip shortages appear to be spreading, limiting selection and tamping down goods demand."

Retail sales rose 0.7 per cent last month. Data for August was revised higher to show retail sales increasing 0.9 per cent instead of 0.7 per cent as previously reported. Economists polled by Reuters had forecast retail sales would slip 0.2 per cent. Consumer prices increased 0.4 per cent on a monthly basis in September suggesting the so-called real retail sales rose 0.3 per cent last month.

An ongoing global shortage of microchips is forcing automakers to cut production, leading to a scarcity of inventory at showrooms, which is boosting prices. The semiconductor shortage has also impacted the supply of electronics and appliances. Congestion at ports because of a dearth of workers has also meant fewer goods on shelves heading into the holiday shopping season, limiting choice for buyers.

U.S. President Joe Biden on Wednesday announced that the Port of Los Angeles would join the Port of Long Beach, two of the country's busiest, in expanding round-the-clock operations to unload an estimated 500,000 containers on cargo ships offshore. 

Spending shifted to goods from services over the course of the COVID-19 pandemic, straining supply chains. The rotation back to services, such as travel and dining out, has been slowed by a resurgence in coronavirus infections over the summer, driven by the Delta variant.