Retail sales were tepid in June, with some sectors able to squeeze out gains but the overall pace of spending remained stagnant.
Specialty stores posted a 0.1% seasonally adjusted increase to $21.5 billion compared to May and rose 0.4% compared with June 2016, according to the U.S. Census Bureau.
General merchandise stores bounced back from months of sales declines with a 0.4% increase to $57.2 billion for the month, but were down 3.9% from a year earlier. Department stores continued to struggle, with sales virtually flat at $12.5 billion for the month. Sales at non-store retailers, which includes e-commerce and direct-to-consumer purchases, increased 0.4% to $51.6 billion compared to May.
Overall retail sales, excluding automobiles, gasoline stations and restaurants, fell 1 percent in June to $417.51 billion, but were up 3.2% from June 2016.
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“Deflating pricing in retail continues to aggravate measurements of spending in June. Consumers continue to make purchases, but total sales reflects depressed prices on the volume of goods purchased,” said NRF’s chief economist, Jack Kleinhenz. “Nonetheless, consumer fundamentals remain solid, with no expectations for spending to cool off in the remaining summer months. Given the strength of consumer sentiment and other indicators – housing prices, net worth and use of credit–it’s puzzling to see consumer spending move at a slower pace.”
Chris G. Christopher Jr., executive director at IHS Markit, said major losers in the month were clothing, sporting goods, department stores and grocery.
IHS Markit is now forecasting consumer spending adjusted for inflation to be around 2.8% for the second quarter, significantly stronger than the first quarter’s showing of 1.1%.
“Consumers were cautious for the last two months of the second quarter,” Christopher said. “In June, most retail channels were either underwater or posted anemic growth. The exceptions were building material and garden supply outlets, drug and health stores, general merchandise excluding department stores, and online outlets.”
He added, “The ongoing story is the decline of department stores and the surging performance of e-commerce retail sales.”
“Our forecast calls for growth of 4.3% in back-to-school retail sales this year compared to last year, which would be the strongest growth since 2014,” Christopher said. “Consumer spending will remain an engine of U.S. economic growth, supported by rising employment, real disposable incomes, and household wealth.”