Inflation Contributes To Higher October Retail Sales

Insights | Inflation Contributes To Higher October Retail Sales

Author: David I. Templeton, CFA, Principal and Portfolio Manager

Wednesday's October retail sales report showed a strong retail sales increase, month over month (MoM) of 1.7% and a year over year (YoY) increase of 16.3%. Inflation has been the topic du jour and this has contributed to the increase in the retail sales data. The following two charts show 'real' retail sales, i.e., adjusted for inflation, for both the month over month and year over year time periods. The first chart shows real retail sales increased .7% MoM versus the reported nominal rate of 1.7% and the second chart shows YoY real retail sales increased 9.5% versus the nominal 16.3% increase reported.

October 2021 nominal versus real retail sales month over month


nominal versus real retail sales year over year October 2021

inflation is also having an impact on corporate earnings reports. Quarterly earnings reports are peaking and inflation is creating a favorable variance to reported earnings for companies. An example is Tyson Foods (TSN), a holding for our client accounts. TSN reported quarterly results a few days ago and sales volume was down over 10% in their fourth quarter report ending October 2, 2021, but total sales were up 11.7% ($12,811/$11/460). The sales increase resulted from a 22.5% increase in prices. The year over year sales increase equaled 8.9%, yet volumes were down 2.8% but prices were up 13% as seen below.

Tyson Foods (TSN fourth quarter 2021 sales report

In short, inflation is distorting the results for some of the economic data as well as corporate earnings reports. Some anecdotal data is suggesting the inflation pressure may be transitory, i.e., port backlog easing, inventory levels increasing, etc. For investors though, it is worthwhile taking into account the impact of inflation on reported economic and financial reports.

Disclosure: Firm and family long TSN

HORAN Capital Advisors, LLC is an SEC registered investment advisor. The information herein has been obtained from sources believed to be reliable but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results. Market conditions can vary widely over time and there is always the potential of losing money when investing in securities. HCA and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only and is not intended to provide and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.