Retail sales rebound in June

Retail sales across the U.S. rebounded in June. Demand remains strong despite shifting away from goods to services and travel and declining automobile sales.

The Department of Commerce reported Friday retail sales rose 0.6% last month. Meanwhile, officials revised down data for May to show sales falling 1.7% instead of declining 1.3% as previously reported. Sales outpaced economists’ expectations of a 0.4% dip in June.

The June sales totaled $621.3 billion, up a whopping 18% above June 2020, the department reported, showing resilience among consumers despite rising COVID-19 cases. Economists said sales were also buoyed higher from rising prices amid supply constraints.

Economists with Wells Fargo Securities said the nation is still experiencing growing pains concerning demand outpacing supplies in many categories, from automobiles to building materials. The report also indicated some spending shifts from electronics and grocery into travel and entertainment.

“Last summer, parents were trying to get their hands on basketball hoops and trampolines and spending more time working in the yard or fixing up the house,” said Tim Quinlan, a senior economist at Wells Fargo. “This summer, the kids are headed back to camp, or the family is ready to hit the road.”

Consumer sentiment remains elevated according to the July University of Michigan sentiment index, which stood at 80.8. The level is high despite coming down from 85.5 in June as price inflation moved higher.

Moody’s economist Scott Hoyt said consumers have a lot of cash on hand and use credit cards less often. He said saving levels are higher than they have been in years, and rising real estate prices are also enhancing consumer balance sheets.

The report showed sales at auto dealerships slipped 2% in June, on the heels of a 4.6% decline in May. Apparel sales rose 2.6% and are expected to be higher through the summer as consumers return to workplaces and schools this fall. Sales at gas stations were also higher, as were restaurants and bars, rising 2.3% in June from the prior month. Year-over-year sales at restaurants are up 40%.

“Heading into the back-to-school season, we expect record sales as families purchase electronics, shoes and backpacks for in-person learning this year,” said Matthew Shay, president of the National Retail Federation.

Unadjusted online sales in June totaled $85.1 billion, up 1.2% from the prior month. Online sales jumped 11.9% from June 2020.

“The economy and consumption are particularly sensitive to government policy, and the boost we saw from government support earlier in the year is continuing to show benefits,” said Jack Kleinhenz, chief economist at the National Retail Federation.

He said the reopening of stores and the overall economy has progressed. While higher prices in some retail categories reflect the push-and-pull of supply chain challenges, he said that hasn’t proven to be a deterrent to spending.

“As more people get vaccinated and get out, some of the growth will shift to services rather than retail, but there’s enough momentum to support both,” Kleinhenz said.