Stateside retail sales seem to be inching back up, but cautious optimism will be key as uncertainty and ongoing pressures could still derail what appears to be the early stages of a recovery.
Overall U.S. retail sales rose 1.2 percent from June, reflecting a slight increase in July even as coronavirus infections continued to rise in parts of the country. Apparel and accessories sales did even better at up 5.7 percent on a sequential basis.
Growth, however, slowed in July from a revised 8.7 percent jump in June, and the downward trend could continue as states potentially pull back on reopening plans with the virus still far from under control. More importantly, data from the Commerce Department showed that retail sales, for now at least, are back to the level they were in February, before the COVID-19 outbreak hit the country hard in mid-March.
Retail trade sales were up 0.8 percent from June 2020, which is 5.8 percent above last year’s levels.
Despite the decent news on overall retail sales in the U.S., sales in the fashion sectors were mixed.
On a seasonally adjusted basis, sales at apparel and accessories stores rose 5.7 percent to $17.73 billion from June, but still saw a significant decline of 20.9 percent in the year-over-year period. Sales at department stores managed to inch up 0.1 percent to $9.90 billion from June, but saw a 13.4 percent decline year-over-year. And while nonstore retailers rose just 0.7 percent to $84.04 billion from June, this category representing e-commerce sales saw a 24.7 percent jump year-over-year.
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“Americans are showing their continued resilience and willingness to spend in the face of this unprecedented pandemic and government actions to date have clearly supported consumers and the economy in this process,” National Retail Federation (NRF) president and CEO Matthew Shay, said. “Retailers all across the country have demonstrated that their stores and supply chains can be operated safely and effectively for associates and their customers by following established guidelines and protocols. We encourage Congress and elected leaders at all levels of government to enact policies that support consumers and keep the economy open.”
While the July report has some cause for optimism, it’s not clear what the sales trend will be for the balance of the year, particularly as public health officials have predicted another wave of virus infections come fall.
“Retail sales are starting the third quarter on a solid footing considering the nosedive we saw this spring, but we have to remember that there’s uncertainty about economic policy and that the resurgence of the virus is putting pressure on the fledgling recovery,” Jack Kleinhenz, NRF’s chief economist said. “The amount of uncertainty about forecasting is huge as we look toward the second half of the year, and what happens with the economy comes down to what the coronavirus allows us to do.”
Looking at the data, May saw a revised jump of 18.2 percent in sales as stores started reopening and consumers headed out to pick up what they couldn’t when retail doors were closed. For many, the easing of restrictions represented an ability to get out of the house after weeks of sheltering in place. But retail sales slowed in June after the initial spike in May, and continued to slow in July. And it could slow even further in August and beyond.
Federal stimulus checks did help to boost some spending, and those who are unemployed, also received an additional benefit of $600 a week in federal unemployment assistance on top of their regular state benefit. But the federal benefit expired at the end of July, and whether Congress can agree on an extension remains unclear. While it appears that another rescue package is needed, just how it will be structured and who will receive benefits hasn’t been determined.
Another factor to consider is the state of first-time claims for unemployment benefits. For the week ended Aug. 8, the Labor Department said new applications dropped to 963,000, the first time claims fell below 1 million since March. While still high, the number of claims is significantly down from the nearly 7 million in first-time filers at the end of March when retail workers started getting furloughed. While many furloughed workers have been called back to work as some stores reopen, a good number will remain on the unemployment line as retailers continue to close stores.
The August 2020 Advance Monthly Retail report is slated for Sept. 16th, the Commerce Department said.