Retail sales rose 1.0 percent in June to $680.59 billion, according to the U.S. Census Bureau’s Friday report, though the seasonally adjusted data doesn’t factor in changes in prices. This suggests that some of June’s growth came as a result of retailers raising sticker prices and could mean that the month’s sales might have declined.
In fact, Wells Fargo economists Tim Quinlan and Shannon Seery estimated that real retail sales adjusted to reflect inflation fell 1.0 percent.
Apparel and accessories store sales in June were essentially flat at $25.76 billion versus $25.87 billion in May, versus $25.83 billion a year ago. Department store sales slipped 3.0 percent to $11.23 billion from $11.53 billion in May, compared with $11.56 billion a year ago. Non-store retailers, or companies that only sell online, rose 2.0 percent to $105.23 billion from $103.01 billion in May, versus $96.05 billion in the year-ago period. At furniture and home furnishings stores, sales rose 1.0 percent to $12.38 billion from $12.21 billion in May, compared with sales of $11.84 billion a year ago.
On Wednesday, the Consumer Price Index indicated that retail apparel prices rose a seasonally adjusted 0.8 percent last month, on top of a 0.7 percent gain in May. In addition, the report showed that inflation was up an unadjusted 9.1 percent over the last 12 months. That represented the largest 12-month increase since November 1981.
“June retail sales data shows that consumers remain on solid footing despite rising prices and an active Fed raising interest rates to combat it,” National Retail Federation president and CEO Matthew Shay said. “Inflation has consumers modifying their spending behavior and prioritizing essentials like food, energy and back-to-school items. Unfortunately, modified consumer behavior won’t be sufficient to offset persistent price increases.”
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In addition, the University of Michigan’s Consumer Sentiment Index hit 50.0 last month, its lowest level on record. On Friday, the Index barely showed a gain, inching up slightly to 51.1 for July’s early read for a 37.1 percent decline from 81.2 percent a year ago. Data suggests consumers might be spending now to get ahead of prices going even higher.
“Consumer sentiment was relatively unchanged, remaining near all-time lows. Current assessments of personal finances continued to deteriorate, reaching its lowest point since 2011,” surveys of consumers director Joanne Hsu said. “The share of consumers blaming inflation for eroding their living standards continued its rise to 49%, matching the all-time high reached during the Great Recession.”
For now, economists expect at least a 75-basis-point interest rate hike when the Fed meets on July 27, although some predict a 100-basis-point increase. The Fed will have a fine line to walk in trying to slow demand to bring down inflation.