Consumers seem to be opening up their wallets as retailers open up their stores.
As retail re-openings increased, consumer spending on clothing and footwear rose a seasonally adjusted 29.57 percent to $411.37 billion in June, compared to $317.48 billion in May, the U.S. Bureau of Economic Analysis (BEA) revealed Friday in its Personal Income and Outlays report.
This marked the second straight month of increases in personal consumption and expenditures (PCE) after four consecutive months of declines, including an historical nosedive in April. PCE for all goods and services in the U.S. increased 5.6 percent, or $737.7 billion, for the month.
Real PCE, adjusted for inflation, increased 5.2 percent for the month. The PCE price index increased 0.4 percent, or $623 billion, while the core index, excluding food and energy, rose 0.2 percent.
The rise in real PCE in June, according to BEA, reflected an increase of $273.7 billion in spending for goods and a $362.1 billion hike in spending for services. Within goods, the leading contributor to the increase was spending for clothing and footwear, based on Census Bureau Monthly Retail Trade Survey data. Within services, the leading contributors to the increase were spending for health care, as well as food services and accommodations.
The increased spending was reflected in the June retail sales report. The U.S. Census Bureau reported earlier this month that overall retail sales during June were up a seasonally adjusted 7.5 percent from May and 1.1 percent higher year-over-year. Clothing and clothing accessory store sales increased a seasonally adjusted 105.1 percent month-over-month, but were down an unadjusted 24.3 percent year-over-year.
“June’s numbers show that retail spending is fueling the economic recovery,” Jack Kleinhenz, chief economist at the national Retail Federation (NRF), said. “How durable the improvement in retail spending will be is directly related to how widespread the resurgence in COVID-19 cases becomes. All eyes are on the infections that are accelerating in many parts of the country and they pose a serious threat to recovery.”
Personal income decreased 1.1 percent, or $222.8 billion, in June, while disposable personal income (DPI), a key barometer for retail spending, was down 1.4 percent, or $255.3 billion. Real DPI decreased 1.8 percent.
BEA said the June estimate for personal income and outlays was impacted by the response to the spread of COVID-19. Federal economic recovery payments continued, but were at a lower level than in May, and government “stay-at-home” orders were partially lifted in some areas of the country.
Partially offsetting the decrease in other government social benefits were increases in compensation of employees and proprietors’ income, as portions of the economy continued to reopen in June, BEA noted. Unemployment insurance benefits, based primarily on unemployment claims data from the Department of Labor’s Employment and Training Administration, also increased in June.
Personal outlays increased $734.4 billion in June. Personal saving was $3.37 trillion and the personal saving rate–personal saving as a percentage of disposable personal income–was 19 percent.