Retail sales keep on chugging along.
To that end, the data released Tuesday (Aug. 15) by the Commerce Department showed that consumer spending, overall, remained strong against a backdrop where inflation’s growth rate slowed.
Overall, retail sales were up 0.7% in July vs. June, better than 0.4% that had been forecast by consensus estimates.
The fact that inflation was up 0.2% month on month indicates that not all the retail sales increase were due solely to price increases. The simple fact is that individuals and households are spending more in stores and online.
Mostly.
Line by line, category by category, as is usually the case, the retail sales report shows that not every vertical has seen a spending surge.
Spending on food and in grocery stores rose 0.8% month on month, according to the results, and eating away from home saw a 1.4% boost in spending, indicating that in the summer months at least, dining out still is an activity of choice.
Spending on clothing and accessories was up 1% on the month.
But it was in the furniture segment where sales slipped 1.8% and electronics and appliance stores saw a 1.3% decline.
These are the key areas, then, where consumers are pulling back, where, perhaps, they’ve stocked their homes and lined the walls with the TVs they need and the upgraded dishwashers they wanted.
August’s data, of course, will show whether there’s a rebound in those categories, amid back-to-school spending flurries. But these are also key spending avenues that seem likely to impact results at companies such as Walmart and Target in the current and quarter and beyond. For Walmart, for example, home and apparel represent about 10% of Sam’s Club sales; for Target, home furnishings and décor represented about 15% of sales in the most recent quarter.
Elsewhere, the U.S. Census Bureau released the latest data on U.S. business inventories, noting that in June, retailers’ business inventories crept up 0.7% month on month, while sales were up 0.2% in the same period. The inventories/sales ratios stood at 1.3 months in the most recent reading, up from the 1.24 seen last year and flat with the 1.3 ratio logged in May. This indicates that, at least incrementally, it’s taking longer to clear the goods off the shelves, and out of the websites.
The real “tell” of how retailers are seeing the give and take of consumer spending will be evidenced in retailers’ earnings, of course. But there are some signs that a post-summer bump may be harder to come by. As reported here, as recently as this month, U.S. consumers seemed slightly less optimistic about the economy than they had recently.
The preliminary data and index measuring consumer sentiment released at the end of last week by the University of Michigan fell to 71.2 in August from July’s 71.6.
The data showed that expectations for inflation stand at 3.3% for the year ahead. That measure is down slightly from 3.4% seen in July. And it’s worth noting that the Index of Consumer Expectations — which measures sentiment over how the economy will fare over the next six months — nudged down to 67.3, where that number had been 68.3 in July. If sentiment remains pressured, even a bit, then it follows that the surge in retail spending, as seen in July, and possibly in August amid back-to-school promotions, may be in the rearview mirror.