Consumer sentiment is low but spending is high: Analyst

Ted Rossman, Senior Industry Analyst, joins Yahoo Finance to discuss the latest retail sales data, consumer sentiment, and future outlook on consumer spending amid supply chain bottlenecks.

Video Transcript

KARINA MITCHELL: Welcome back. Well, retail sales came out earlier today. And as we told you earlier, it was a pretty pleasant surprise that we got, up 7/10 of 1% percentage point versus decline of 0.2%. Here to discuss that data further is Ted Rossman, senior industry analyst at Ted, thanks so much for being here. A pretty decent beat, right?

And then we also saw that August sales numbers went up as well, up to 0.9%. A little bit of a juxtaposition when we saw consumer sentiment numbers out today, which were at an almost decade low. So perhaps the road in the future may not be quite as rosy, but when you look at today's number and the data from today, I'd love to get your read on what the numbers look like to you, which sectors performed the best, starting with services.

TED ROSSMAN: The resilience of consumer spending really stands out to me here because this was the fifth month in a row when the consensus analyst estimate was for a monthly drop in retail sales. And it was the third time in those five months that we actually saw a surprise increase. So it really does fly in the face of those consumer sentiment numbers you were mentioning. Sentiment is low, but spending is high.

And if we look especially at the year over year comparisons that I think are really most instructive here, we see gas stations with a big gain. Now that's an inflation story. But we also see things like bars and restaurants, their sales are up 30% year over year. That's a strong reopening play. Next would be clothing sales, up 22% year over year. I think that's a proxy for reopening. People are going back to the office. They're going back to social occasions. It's really surprising how strong good sales have been throughout all this.

ALEXIS CHRISTOFOROUS: You know, it really is surprising, Ted, because we've got all these supply chain issues, especially when it comes to big ticket items like furniture and appliances. People are waiting longer and longer, even after they've purchased these items. So I'm wondering, as the supply chain issues continue, and we're hearing from all the experts that they expect them to continue at least through the beginning of next year when does that finally start to weigh on consumer sentiment and show up in the form of consumer spending?

TED ROSSMAN: This is another one just like the downbeat confidence numbers. You would think that this would be hitting these sales more, but the supply chain disruptions, the inflation news, it's really not doing much to dampen these stats. We did see electronic sales dip a little bit month over month. They were one of only two categories-- health was the other one-- that went down a little bit. But, you know, really, the story has been remarkably positive. I think what it goes to show is that there are some shortages of certain items. It was interesting.

Car sales actually increased month over month because that's one that we've been hearing about a tremendous amount of shortages. But, you know, it seems like maybe people are making substitutions. And even if they can't get exactly what they're looking for, they're buying something else. That's a trend that I think we'll see throughout the holidays. We know some things are in short supply, like video games, for example, certain toys. But I think people are ready to go. They've saved more, they've paid down debt. Retail is in a strong place right now.

KARINA MITCHELL: Well, as we move forward into the holiday season, how much of an impact do you think consumer sentiment will have? I know you said that it doesn't play as much, but it is much more of a forward looking number, right? Some of these numbers that we got, there were also back to school sales, which I'm sure helped boost the bottom line for the data that we saw today.

But moving forward, I know there's also a lot of money on the sidelines, right? We hear that there's $800 billion in checkable deposits. People have the money, and they're willing to spend. How much of this is going to come down to supply chain issues and not being able to get the goods they want? How does the holiday season look as far as sales?

TED ROSSMAN: I think there's a good chance that that excess savings and the pent-up demand for as normal of a holiday season as we can have, I think that's going to outweigh some of the potential negatives here, being the supply chain and inflation, namely. If we just look at the year over year comparison, this most recent read on September retail sales were up about 14% year over year.

And that's a theme we've seen over the past six months. Even though sales have plateaued a bit month over month relative to March, the gains over last year remain quite strong. So we see holiday shopping forecasts from the likes of Deloitte and Mastercard, something like 7% to 9% above last year. I think they could be higher, because even if we just tread water from here, we might be talking something like a 15% gain.

ALEXIS CHRISTOFOROUS: All right, Ted Rossman at, we appreciate you being with us today.

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