Consumers are Eager to Spend While Manufacturers are Struggling

US consumers are eager to spend but manufacturers are slow to – or cannot – respond.

Retail sales increased 1.9% m/m in September after a 0.6% m/m July increase. September gains were especially strong for autos, clothing and sporting goods. Even department store sales rose 9.7%.

Surprisingly, e-commerce sales – what the Census Bureau labels non-store sales – rose only 0.5% m/m in September and 0.2% m/m in August. However, y/y sales were up 23.8% in September and 22.8% in August. Perhaps e-commerce providers are running into capacity limits. Online sales are down almost 2% from May. Supporting the constraint hypothesis, Amazon last month announced the hiring of an additional 100K workers. The Amazon global employ population is approaching one million.

The September Industrial Production report also suggests manufacturers are constrained and are struggling to respond. Output in the industrial sector fell 0.6% m/m in September with declines across nearly all major categories. Apparently, the global supply remains crippled. With COVID-19 cases on the rise across much of the nation, it’s also likely manufacturers in some locations are impacted by virus related shut downs.

Last week’s initial unemployment benefit claims increase also suggests the challenge the business sector is facing. Without new data from California and Michigan – two of the largest states – claims increased 53,000 to 898,000 on a seasonally adjusted basis. The unemployment claims data should be viewed with caution as the states are concerned about the potential for fraud and workers submitting multiple applications. Nonetheless, the increase suggests increased employment tumult.

The economy’s supply side is struggling to find healthy workers, reinvigorate the global supply chain, and transform strategy and operations in a new world.