U.S. retail sales for June rose 7.5 percent to $524.31 billion from May on a seasonally adjusted basis, while the April 2020 to May 2020 percent change was revised up from 17.7 percent to 18.2 percent.
All good news for the early easing of restrictions as nonessential retailers began their reopening process to restart the economy. Retail trade sales excluding autos, vehicle parts and gasoline sales, rose 6.4 percent to $476.88 billion in June from May’s tally of $448.20 billion, seasonally adjusted.
However, the real winner in the retail channel was nonstore retailers, which rose 23.5 percent to $82.80 billion from the same year-ago period on a seasonally adjusted basis, as e-commerce sales continue to surge. Apparel and accessories specialty retailers in the same period saw sales decline 23.2 percent to $17.10 billion, while department stores posted a 10.6 percent decline to $10.09 billion.
But the caveat is that the June report is a backwards look at economic data. Surging COVID-19 infection rates at the tail end of June could derail the economy’s faltering restart. The uptick in virus cases has kept many consumers away from brick-and-mortar stores, while some states and cities have mandated another round of lockdowns.
“The retail sales numbers from last month were very encouraging and reflect continued progress in the right direction,” NRF president and CEO Matthew Shay said. “It’s clear that congressional relief packages have found their way into consumers’ pockets and are being spent by people who are happy to be back out in communities that are slowly reopening. However, recent spikes in infection rates across the country have us focused on keeping associates and their customers safe, which is the only way we can keep the economy open as we move forward.”
Related Stories
Nonessential retailers began their reopening in May, and some states such as Texas, Arizona and Florida were early leaders in easing restrictions. Stimulus checks and pent-up demand help buoy consumer spending in May and June.
“The U.S. picked up very fast, and it looks like it will pay a price [for] that,” Ethan Harris, head of global economics at Bank of America, said, noting that he expects a slower pick-up in July and August.
“The data already suggests the economy leveled off in July in most impacted states,” Harris said in a BofA webinar on the global economy on Tuesday. With the virus “now out of control in a big chunk of the economy,” or surging in 40 percent of the U.S., the rest of the country is likely to reopen more slowly, he added.
Moody’s Investors Service said the data topped its expectations, too.
“The very strong retail [trade] sales growth of 6.4 percent blew past our expectations [and] demonstrates the amazing resiliences of the consumer in these unprecedented times as the economy begins to open and government closure mandates for discretionary retailers are lifted,” said Mickey Chadha, vice president at the credit ratings firm. She also noted that recent surges in COVID-19 infections in hotspots across the country and the expiration of government stimulus programs could put a damper on the recovery in the overall retail sector in the coming months.
“However, we do expect online sales to continue their extraordinary upward swing as consumers get comfortable adding more product categories on their online shopping list,” she added.
According to data from The Conference Board, global consumer confidence is also deteriorating in the second quarter due to deteriorating job prospects and rising anxieties about personal finances. The global consumer confidence index is now at 92, down from 106 early in the first quarter before the pandemic expanded beyond China.
“Looking forward, more consumers than before plan to limit spending on annual vacations, rein in short trips, and spend less on out-of-home entertainment in the long term,” Denise Dahlhoff, The Conference Board’s senior researcher in the consumer research group, said.
Despite the June sales results indicating that retail is fueling an economic rebound, “How durable the improvement in retail spending will be is directly related to how widespread the resurgence in COVID-19 cases becomes,” said NRF chief economist Jack Kleinhenz. “All eyes are on the infections that are accelerating in many parts of the country and they pose a serious threat to recovery.”
“Recoveries do not proceed in a straight line and no two are alike,” he added. “The current economy is far from normal and will require a lengthy period to absorb job losses and build up to where it was before. Government aid for consumers and businesses has helped but additional relief is warranted to sustain the consumer spending that is the backbone of our economy.”
On Thursday, the U.S. Department of Labor said initial weekly jobless claims were 1.3 million for the week ending July 11, which also represented the 17th week in which first-time unemployment claims were over 1 million.
While that is far lower than the 6.6 million claims filed in one week at the end of March at the height of the lockdowns when nonessential retailers were furloughing their staff, there’s every indication that more layoffs could be ahead. Retailers and restaurants that are reopening locations have brought back some of their staff from furloughs. But retailers are also watching consumer shopping patterns as they gauge trends to determine store network and inventory levels in a new post-COVID-19 normal, and some such as Macy’s and Nordstrom have already started restructuring. Then there are bankrupt retailers to consider, like J. C. Penney, which is also shedding headcount.