US retail sales rose in June

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US shoppers boosted retail spending in June as the economy broadly reopened and auto dealers deal with supply disruptions.

The Commerce Department reported Friday that retail sales — a measure of purchases in stores, restaurants and online — rose 0.6% last month compared to May.

Auto sales, which showed signs of slowing amid supply chain turmoil that limited the number of cars for sale, weighed on overall retail sales in June. Excluding cars – a sometimes volatile product category – sales rose 1.3% in the same period. Meanwhile, car sales fell 2%.

Retail spending slowed in late spring after picking up earlier in the year due to the impact of federal coronavirus aid on households. The June increase represents an increase in consumer spending.

Consumers in June spent more on products and services linked to the resumption of outdoor activities as governments ended many of the remaining Covid-19 restrictions. Sales rose strongly in restaurants, bars, and clothing and accessories stores. Meanwhile, sales fell in categories that benefited from strong demand earlier in the pandemic as Americans stayed home. Sales decreased in furniture, sporting goods and building materials stores.

Supply chain disruptions have limited the number of vehicles for sale. Photo: David Paul Morris/Bloomberg News

Fast forward to June, it’s an almost perfect flop,” said Tim Quinlan, Wells Fargo’s chief economist. He said consumers are now thinking of “anywhere but home,” which should benefit retailers in hard-hit industries earlier.

Ann Ledbetter, co-owner of Meriwether Cider in the Boise, Idaho area, said business has mushroomed into two Cidbetter locations since mask mandates were lifted earlier this spring. Once this restriction was relaxed, Ms Ledbetter said she felt comfortable returning seating to the indoor bar areas. She also noticed a revival in tourists and events, which she said is particularly helpful for the company’s downtown Boise location.

“We would expect a slight increase when the weather is warm anyway, but this was better than the usual seasonal increase we saw last spring and summer,” Ms Ledbetter said. “Even if you get past the levels, it will be better than 2020, and it is already much better even than in 2019.”

Many economists said they expect consumers to shift spending away from buying goods, especially expensive ones, to the services sector as the end of pandemic-related restrictions allows the economy to open up fully and Americans to resume outdoor activities.

Bank of America’s tracker of credit and debit card spending showed that consumers in June boosted spending at restaurants by 2.7% and on housing by 7.8% compared to May, on a seasonally adjusted basis. Spending on clothing, general merchandise and stores also rose sharply, while spending on furniture fell.

“The sectors supported by the pandemic are slowing down a bit, but not to the point where I am concerned,” said Philip Chacon, an economist at Square Payments. “Families’ finances have been boosted by a few rounds of stimulus spending, so it bodes well” for retail sales at scale, he said.

The National Retail Federation, a trade association, in June raised its forecast for annual retail sales this year to between $4.44 trillion and $4.56 trillion, from $4.33 trillion to $4.44 trillion previously.

The upwardly revised outlook reflects a strong macroeconomic recovery and better-than-expected growth in retail sales, said Catherine Cullen, director of industry and consumer insights at the trade group.

It expects merchandise retailers offering products related to activities in the services sector, such as travel, to see further strength in the coming months. She also expects quick back-to-school sales as families stockpiled products they didn’t need last year because many students were learning remotely.

Economists said they expect consumers to shift spending from goods to services such as eating out as restrictions imposed by the pandemic are lifted. Photo: Steven Zener/Zuma Press

However, some retailers said challenges attracting workers to job vacancies and supply chain disruptions are putting restrictions on business.

Semiconductor shortages helped drive up car prices in June. The Federal Reserve reported Thursday that US manufacturing production fell slightly last month, as production of cars and parts fell sharply.

Demand has been strong since last summer for items such as televisions, smart speakers and amplifiers, said Alan Gees, co-owner of electronics retailer Audiotronics in Roanoke, Virginia, with in-store traffic increasing in recent months as the pandemic has spread. loosen up. But he said he often encounters customers who are looking for products that are out of stock or backlog for months due to supply chain issues ranging from lack of inputs to long shipping times.

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“It’s frustrating, of course. Some days it’s a missed sale. Customers are frustrated. We’re all used to being able to ‘just in time’ for anything,” referring to being able to get products at or near the desired time.

Federal Reserve Chairman Jerome Powell said he expects upward price pressures to abate as supply chain issues and frictions associated with the intensifying economy resolve.

Mr. Quinlan of Wells Fargo said he does not expect the price increase to deter Americans from spending at the moment.

“Right now, it’s consumers who are taking the prices,” Mr. Quinlan said, noting that many families have cash on hand from savings during the pandemic and the start of monthly payments for the Extended Child Tax Credit.

“The pent-up demand is too much” to spend on things like vacations, car rentals and flights, he said. “Once that spike in sugar wears off, you’ll start to see normal price sensitivity return to consumer behavior.”

Write to Amara Omeokwe at [email protected]

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