Retail Sales Declined in June

By JCK Online Staff -- JCK Online, 7/13/2007 9:21:00 AM

Retail industry sales for June (which exclude automobiles, gas stations, and restaurants) rose 3.4 percent unadjusted over last year and decreased 0.5 percent seasonally adjusted from May, according to the National Retail Federation.

June retail sales released by the U.S. Commerce Department show that total retail sales (which include non-general merchandise categories such as autos, gasoline stations and restaurants) decreased 0.9 percent seasonally adjusted from last month and increased 3.2 percent unadjusted year-over-year.

“Consumers scaled down their shopping last month to buy necessities, which negatively affected department and specialty stores,” said NRF chief economist Rosalind Wells. “Retailers are now shifting their focus toward back-to-school, which should provide a nice sales boost in July and August.”

Global Insight, a Lexington, Mass.-based firm that provides economic, financial, and political coverage of countries, regions, and industries, says the Commerce Department data shows that the decline was broad based, with big-ticket items such as motor vehicles, furniture, and building materials showing the steepest declines.

"Core retail sales (that feed into estimates of gross domestic product) declined by a more modest 0.2 percent. But that follows an outsized May gain of 1.3 percent," said Brian Bethune, Global Insight U.S. economist. "For the second quarter as a whole, core retail sales were up by an annualized 7.4 percent. However, very strong gains in top level consumer prices, particularly gasoline prices, will erode the lion's share of these illusory nominal dollar gains. As a result, we estimate that real consumption spending advanced by only 1.2 percent in 2007:Q2, a stunning deceleration from 4.2 percent in 2007:Q1. Even with this expected sharp deceleration in consumer spending, second quarter GDP is expected to advance by 3.4 percent, with strong gains in overall business investment and net exports more than offsetting the drag from consumer spending."

Bethune noted that the data shows that consumers are being more cautious about their spending.

"Consumers are becoming more cautious in the face of major negative hits to disposable income from recent rapid rises in food and energy prices and a stalling out in the growth of total housing wealth," he said. "Nevertheless, the relatively strong job market should keep spending moving forward at moderate rates in the second half of 2007 and not derail the economic expansion."

NRF reported that health and personal care stores seemed to show resilience to consumer’s slowed spending last month, with sales increasing 1.2 percent seasonally adjusted over May and a solid 6.7 percent unadjusted from last June. General merchandise stores were another bright spot, with sales increasing 0.3 percent seasonally adjusted month-to-month and 5.3 percent unadjusted year-over-year.

Clothing and clothing accessories stores sales decreased 1.4 percent seasonally adjusted month-to-month and increased 4.9 percent unadjusted year-over-year, NRF said. The electronics and appliances category also posted mixed results with sales decreasing 1.4 percent from May and increasing a modest 1.4 percent unadjusted from last June.

The weak housing market hit furniture and home furnishings stores and building material and garden equipment and supplies dealers the hardest, NRF said. Sales decreased 3 percent from last month and 1.4 percent unadjusted year-over-year at furniture and home furnishings stores, and decreased 2.3 percent seasonally adjusted from last month and 2.6 percent unadjusted over last June at building materials stores.