Yesterday, the US Commerce Department reported that US retail sales in September had significantly exceed expectations and that spending was up from August in all but one of the major categories.
The retail report revealed that overall US retail spending is now above pre-pandemic levels. But despite the gains, spending in key sectors that have suffered the most dramatic job losses during the pandemic, such as restaurants and clothing stores, still remain far below last year’s levels.
The September increase for US retail sales was most likely driven by Washington’s $300 supplement to unemployment insurance as well as from more people returning to work. Fear of infection on public transit has helped drive private vehicle sales, while the new work-from-home normal has boosted home improvements spending.
September in the US is typically regarded as an in-between month, bridging the back-to-school and holiday season spending. However, this year’s back-to-school season pushed into September as many schools delayed opening for in-person classes, extending sales of school supplies and clothing.
Retailers are also starting the holiday season earlier this year to avoid crowded stores and ease pressure on already strained shipping and supply chains. This week, Amazon.com’s Prime Day sales event kicked off the end-of-year shopping season, which is expected to see consumers spend billions online and be dominated by e-commerce like never before.
In Europe the rising fortunes of French tycoon Bernard Arnault are testimony to the return of luxury goods spending worldwide.
Arnault’s net worth leapt by $8.3 billion this week after his luxury goods conglomerate LVMH posted unexpectedly strong third-quarter results. The gain puts Arnault in the rarified strata of the world’s centibillionaires, along with Jeff Bezos, Bill Gates, Elon Musk and Mark Zuckerberg.
LVMH brands, which include Louis Vuitton, Moet & Chandon champagne and Givenchy are particularly popular among wealthy Chinese consumers. The restrictions imposed on them by lockdowns and the inability to travel internationally has morphed ‘retail therapy’ into a ‘revenge shopping’ phenomena.
“Many wealthy Chinese consumers are switching their spending from international travel to luxury purchases,” Amrita Banta, managing director at luxury consultancy Agility Research announced. “We have seen a lot of interest in more iconic brands and we have seen people upgrading to the more well-known brands.”
Demand should continue to grow, and luxury sales in China are projected to rise as much as 30% this year, according to the Boston Consulting Group’s September report co-authored with Tencent Holdings Ltd.’s market research unit.
LVMH is the first of the major European luxury players to report its third quarter results, and it bodes well for others in the luxury sector such as Hermes.