Retail sales continued to improve despite inflation and jumped from a year ago but debt climbed as well.

Retail Sales Jump but Debt Rises as Well

back to Cozumel and cheddar news, everyone october's retail sales data showing that americans are still spending despite inflation, With retail sales rising 1.3% from the month before and 8.3% from a year ago, purchases of cars, furniture and food services, helping the gains of the consumers are relying heavily on credit cards to purchase these items. And that is leaving unfortunately to ballooning debt with credit card debt, seeing its biggest jump in two decades as unfortunately interest rates take higher. So I want to bring in cheddar news reporter Alex piccolo for more Alex. Such an important story here when we talk about the consumer, let's start with those retail sales numbers, What can we glean from today's report? Well, you know, one narrative that I've reported a lot a lot on a lot and that mostly still holds true is this sort of switch from buying big ticket durable items and buying more services. What's interesting about today's report is that we're seeing uh some uh sort of moderation in that sort of trend. Now we are seeing more uh Sales of big ticket items like furniture and building materials, which suggests some of that home improvement boom that we saw during the pandemic, that that still has some legs on it. We're also seeing motor vehicle sales rising 1.3% month over month, which a lot of people are chalking up to supply chain issues easing on the flip side. Things like electronics and appliances are down 0.3 a whopping 12% year over year. We're also seeing a sizable drop in department store sales, 2.1% drop there with a 1.2% increase in non store i. E. Commerce sales. So well some general merchandise is consumers are pulling away from that dude inflation. There are specific items that they are going, they're continuing to buy. I'm just curious Alex how rising household debt fits into this picture. Right? It's really easy to swipe a credit card but unfortunately that debt can add up over time. Yes. So you know, we do have some new data from the new york Federal Reserve Bank looking at household finances and and this let's look at the numbers really quickly aggregate household debt increased by 351 billion in the third quarter which is a 2.2% increase. Now a big chunk of that was powered by mortgage debt that's close to 70% of the total amount. But credit card debt was a big part of it as well. Growing 38 billion from the last quarter. That's a 15% Year over year increase increase. And as you mentioned, it's the biggest jump in 20 years. So there are some structural explanations for this. You know, greater credit card use overall the millennials sort of aging into, you know having higher incomes and being willing to take out more debt. But it's also a clear sign that we're seeing some normalization from the extremely low credit card balances that we saw earlier in the pandemic because of things like stimulus checks and delayed spending. So could the combination Alex have more debt and these sky high interest rates that have been rising quite quickly this year become a problem you think for consumers going forward? So the answer right now seems to be no. You know when you look at things like delinquency rates, they are ticking up slightly but they are still below the pre pandemic trend, the same goes for debt to income. You know how much debt is does a consumer have versus how much money they're bringing in? All these are historically low. And it suggests that it might be difficult, It might take some time for these higher levels of debt to actually become a problem for consumers. You know if you look at the U. S. Savings rate that was you know significantly higher than the trend of the past multiple decades around the pandemic. Now that's starting to change as well and it does seem to vary quite a bit between income groups. The U. S. Savings rate is dropping for lower income groups And delinquencies are also just about at the pre pandemic trend for the lowest income group. So how about this latest round of retail earnings Alex? What might they tell us about how the economy is faring heading into the all important holiday shopping season. Yeah. Again, you know it's not a straightforward picture, you know when you look at some walmart is celebrating today, you know, they had a really good quarter and a part of that, they're chalking it up to the fact that, you know, they see higher income customers trading down to them. Uh Target has a little bit less slack in that area, because well, one, they have overall higher price point. They also rely more on general merchandise as opposed to essentials like groceries. So again, it's it's a mixed bag today when it comes to retail, uh there are narratives that are emerging. But I think at the end of the day, we're back to talking about inflation and jobs and income growth. If you know, the unemployment rate starts to tick back up and job growth starts to slow, then all this credit card debt may end up being a problem for consumers. Yeah, I think it's important to note too, is people might put some of these holiday purchases on their credit card debt and that uh with those rates rising, that debt could add up pretty quickly cheddar reporter Alex Nicola Alex, thank you