Retail industry sales for June (which exclude automobiles, gas stations, and restaurants) rose 1.3 percent unadjusted over last year and increased 0.2 percent seasonally adjusted month-to-month, according to the National Retail Federation. This is despite the fact that millions of tax rebate checks hit mailboxes in June.
June retail sales released today by the U.S. Commerce Department show total retail sales (which include non-general merchandise categories such as autos, gasoline stations and restaurants) increased 0.1 percent seasonally adjusted from the previous month and increased 1 percent unadjusted year-over-year.
“Many consumers have been practical with their tax rebate checks, using them to offset higher prices of gas and food,” said Rosalind Wells, NRF chief economist. “As retailers enter the back to school season, they will have to be creative in finding ways to get consumers to spend on discretionary items.”
In examining the Commerce Department numbers for June, Brian Bethune, chief U.S. financial economist of Global Insight, said gas price increases mask a stalled consumer environment.
“Retail sales barely moved forward in June,” Bethune said. “When you exclude the price-induced surge in gasoline prices, sales excluding autos and gasoline were up only 0.2 percent. Purchases at gasoline stations soared by 4.6 percent, as seasonally adjusted gasoline prices spiked. Core sales that feed real consumption spending increased by 1 percent, but adjusting for inflation that gain will be peeled back to a real increase of only one or two tenths of a percentage point.
Wells cited as further proof that consumers are focusing on necessities, health and personal care stores sales remained solid, increasing 0.6 percent seasonally adjusted from last month and 2.7 percent unadjusted year-over-year, according to NRF data. Additionally, sales at general merchandise stores increased 0.4 percent seasonally adjusted month-to-month and 4.8 percent unadjusted from last year. Sales at food and beverage stores increased 0.7 percent seasonally adjusted from May and 3.1 percent unadjusted year-over-year.
Even though clothing and clothing accessory stores sales were flat year-over-year, sales increased 0.6 percent seasonally adjusted month-to-month, with consumers responding to warmer weather and seasonal markdowns, NRF said.
“What is troubling about this report is the fairly broad-based weakness in retail sales, despite the delivery of $28 billion in tax rebates and transfers in June, with a cumulative distribution of $78.0 billion since the end of April, Bethune said.
“Clearly, the domestic economy is on the ropes, with weak employment market conditions, declining home and equity prices, and surging gasoline prices inducing the consumer to pull back on major big ticket purchases, opt for discounted items, and choose more fuel efficient vehicles with much lower average sticker prices,” he added.
“While momentum in the domestic economy appears to be stumbling despite the tax rebates, the positive news from all of this is that net exports continue to grow at very impressive rates,” he continued. “That will keep the economy moving forward in the second quarter, and perhaps more importantly, deliver solid productivity gains for the second consecutive quarter. These productivity gains should keep the inflation tiger well-tamed.”