November 21, 2022 — Retail Sales Rise in October


Consumers showed resilience despite rising inflation in October with US retail sales rising 1.3 percent. That is the biggest monthly gain since February of this year and beats economists’ expectations for a 1 percent increase. Retail sales, on an annual basis, were up 8.3 percent compared to 8.6 percent in September.

The strength of consumer spending creates a problem for the Fed.  The resilience of the consumer gives companies no incentive to stop price increases, which makes curbing of inflation more difficult. US economic growth and wage gains need to slow for the Fed to be convinced their actions will reduce inflation.

Last week, Kansas City Fed President Esther George said inflation is in danger of becoming entrenched in the economy due to a strong labor market, making it harder for the Fed to lower inflation without bringing on a recession.

Based on the current data, it is likely the Fed will raise rates again at their December 14-15 meeting. There is still time to lock in current rates by using interest rate hedges if you act fast.