US Retail Sales Gains Are Slowing. Are They About to Reverse?

U.S. consumers kept their hands firmly on their wallets last month. According to the U.S. Census Bureau’s advance monthly report on retail and food services sales, total sales rose by 1.2% month over month, well below the revised estimate of an 8.4% increase between May and June.

The U.S. economic rebound began in May with a month-over-month gain of a record 18.2%. That declined to 8.4% in June and 1.2% in July. The economy is still growing, but only slightly. And new cases of COVID-19, though lower than at their peak in April, remain stubbornly high but have settled at around 115,000 to 120,000 a day.

The largest year-over-year declines occurred in clothing and accessories sales, down 20.9%, and food services and bar sales, down 18.9%, although both were higher than June sales.

Excluding automobile, auto parts and gasoline sales, July’s total rose by 1.5% month over month and was up 3.9% year over year.

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Consensus estimates from Econoday called for a month-over-month increase of 2.0% and an increase of 0.9% excluding automobiles, parts and gasoline.

The August report reflects continued strength in retail sales for the first half of July as consumers continued to make purchases thanks to expanded unemployment benefit payments. Once it became clear that a continuation of the federal payment of $600 a week was in jeopardy, consumers stopped spending.

Restaurant and bar sales that fell by nearly a quarter year over year in June fell by about 19% in July. Dining and drinking sales rose 20% between May and June and 5% between June and July.

Auto sales declined by 1.2% month over month in July after rising 8.2% in June. Year over year, auto sales rose by 6.1% in July compared to an annual increase of 7.5% in June.

A bright spot for the economy was sales at electronics and appliance stores. July sales rose 22.9% compared to June and June sales were up 37.4% over May. Year over year, electronics and appliance sales were down just 2.8% in July, compared to a year-over-year decline of 12.7% in June.

With unemployment still hovering around 16 million and no sign of a congressional agreement on whether or how much to offer expanded benefits, August is shaping up to be a month with even slower growth than July. And that might be the good news.

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