Auto shortages weigh on US retail sales

WASHINGTON, Aug. 17 (Reuters) – Retail sales in the United States fell more than expected in July as shortages weighed on motor vehicle purchases, suggesting moderation in economic growth at the start of the third quarter.

The weak sales reported by the Commerce Department on Tuesday also reflected a drop in online shopping, a return on investment after Amazon postponed its Prime Day to June from July.

As the school year is in full swing later in August and most school districts return to in-person learning, a rebound is likely, although the increase in COVID-19 cases is a wildcard.

Retail sales fell 1.1% last month. The data for June has been revised upwards to show that retail sales rose 0.7% instead of increasing 0.6% as previously reported. Economists polled by Reuters predicted a 0.3% drop in retail sales.

Sales increased 15.8% from July last year.

Receipts at automobile dealerships fell 3.9% after declining 2.2% in June. Motor vehicle production has been hampered by a global semiconductor shortage. The scarcity of crisps has also impacted the availability of some household appliances like microwaves and refrigerators.

“Even though demand remains strong, motor vehicle sales have continued to decline in recent months as semiconductor shortages have made it difficult for consumers to find the vehicles they want regardless of the price. “said Sam Bullard, senior economist at Wells Fargo. in Charlotte, North Carolina.

Retail sales are primarily goods, with services such as healthcare, education, travel, and hotel accommodation making up the remaining portion of consumer spending. Restaurants and bars are the only category of services in the retail sales report.

Clothing store sales fell 2.6%. A rebound is expected as parents shop for the new school year. Online retail sales fell 3.1%. Sales at building supply stores fell 1.2%. Receipts at sporting goods, hobby, musical instrument and book stores declined 1.9%.

But consumers increased their spending in restaurants and bars, leading to a 1.7% increase in revenue. Sales in restaurants and bars increased 38.4% from July 2020. Sales in electronics and appliance stores increased 0.3%.

US stock index futures fell on the data. The dollar appreciated against a basket of currencies. US Treasury prices were higher.

ROTATION OF EXPENDITURE

Part of the cooling in overall retail sales reflects the shift in spending from goods to services like travel and entertainment, with more than 50% of the US population fully vaccinated against COVID-19. The rise in infections caused by the Delta variant of the coronavirus could, however, slow the boom in spending on services.

In late July, the U.S. Centers for Disease Control and Prevention urged fully vaccinated Americans to resume wearing masks in indoor public places in areas where the virus is on the rise.

Excluding autos, gasoline, building materials and food services, retail sales fell 1.0% last month following a revised upward 1.4% gain in June. These so-called basic retail sales correspond most closely to the consumer expenditure component of gross domestic product. They were previously estimated to have accelerated 1.1% in June.

“Keep in mind that retail sales do not capture the majority of service spending and therefore underestimate the resilience of overall consumer spending,” Bank of America Securities economists wrote in a note from research.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, posted double-digit growth in the second quarter, helping to push the level of GDP above its peak in fourth quarter 2019.

With households with at least $ 2.5 trillion in excess savings accumulated during the pandemic, consumer spending is expected to remain strong for the remainder of the year. In July, eligible households began receiving money under the Expanded Child Tax Credit program, which will run until December.

The economy grew at an annualized rate of 6.5% in the second quarter. The Atlanta Federal Reserve currently estimates that GDP growth will increase at a 6.0% pace in the third quarter.

Reporting by Lucia Mutikani; Editing by Nick Zieminski and Andrea Ricci

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