United States: Retail sales continue to grow robustly in June
July 16, 2020
Nominal retail sales increased 7.5% in month-on-month seasonally-adjusted terms in June. Despite decelerating from May’s 18.2% record pace of growth, the reading was better than market expectations of a 5.0% increase. Retail sales excluding cars, gasoline, building materials and food services—also known as core retail sales—jumped 7.3% in June, after growing 12.1% in the month prior.
The rise in retail sales came as large sections of the country continued to ease lockdown restrictions. Retail sales of clothing and accessories surged 105.1% month-on-month in June (May: 176.7% month-on-month). Moreover, retail sales of food services increased notably, while purchases of sporting goods, furniture, electronics and motor vehicles all continued to increase in June.
In annual terms, retail sales increased 1.1% in June, considerably better than May’s 5.6% decline. Meanwhile, the annual average variation in retail sales growth fell to 0.2% from 0.4% in May.
The bulk of the strength in retail sales in May–June was likely due to income support programs in the form of one-time cash hand-outs and extended unemployment benefits. Moreover, pent-up demand and a strong recovery in consumer confidence likely also fueled spending in certain categories like food services and clothing—which were largely unavailable in March–April due to the lockdown.
That said, the unemployment rate remains elevated, extended unemployment benefits are set to expire at the end of July and the recent spike in new Covid-19 cases has forced many businesses to consider making further cuts to employment as some parts of the country reintroduce lockdown measures to control the spread of the virus. All of which hamper prospects for a healthy recovery in household spending in the third quarter.
Commenting on June’s reading, Sri Thanabalasingam, a senior economist at TD economics, noted:
“Retail sales posted another impressive gain in June, and have now recovered almost all of the lost ground since the closures of non-essential businesses in March and April. The level of sales is now only -0.6% off the February level […] Congress is working on a deal to provide additional support to households. Without it, consumers will likely tighten purse strings, and retail sales could again see declines in the months ahead.”
Author: Steven Burke, Economist