[ad_1]
Numbers: Americans cut spending in retail stores in July for the second time in three months, largely reflecting an Amazon Prime Day hangover and a limited selection of new cars.
The rapidly spreading delta strain of the coronavirus may also have partly dampened spending last month, but it is still too early to assess the impact. The amount of money spent in bars and restaurants has grown at the slowest rate in five months.
Retail sales fell 1.1% last month, the government said on Tuesday. Economists polled by the Wall Street Journal predict a drop of 0.3%.
Retail sales are still up 16% in the past year and are above pre-pandemic levels, but revenue growth has slowed in recent months.
In addition, part of the increase in sales reflects rising inflation and rising prices.
Read: The cost of living posts the biggest increase since 2008 as inflation spreads
Big picture: Retail sales were expected to slow after government stimulus payments disappeared. Americans have also taken advantage of fewer Covid restrictions to go to a football game or take long, delayed trips away from home rather than spending money on goods. Retail sales, including in restaurants, represent only a third of overall consumer spending. The rest is spent on services such as education and travel.
The good news is that consumer spending is still pretty strong.
“The larger than expected drop in retail sales is almost certainly due to the continued and accelerated shift from spending on goods to spending on services as the service economy reopens,” said business economist Robert Frick of the Navy Federal Credit Union.
What is less certain is whether the delta variant of the coronavirus is forcing Americans to cut services like they did during most of the pandemic. Early evidence suggests minimal pullback so far, but if coronavirus cases continue to rise, the damage could spread and hurt the U.S. economy in the third quarter.
Key details: The main source of the drop in retail sales last month was a drop in car purchases. Auto dealer sales fell 3.9% for the third consecutive decline.
Automakers cannot produce enough new vehicles to satisfy the appetite of buyers due to a global shortage of computer chips. Semiconductors are now an essential component of modern vehicles.
Auto purchases represent about one-fifth of all retail sales. Excluding autos, retail sales fell just under 0.4%.
Still, sales declined in most major categories. Americans spent less on building materials, DIY projects, furniture, clothing, groceries and hobby items.
Sales also fell sharply at online retailers, but the drop likely reflects a consumer pause after Amazon AMZN,
First day in June. Sales usually slow down the following month.
The only retailers to post significant gains were gas stations and restaurants.
Consumers drive more and also pay much higher prices for gasoline than a year ago.
Restaurant sales rose 1.7% in July, but it was the smallest increase in five months.
Millions of people have flocked to restaurants after being vaccinated and coronavirus cases fell in the spring and early summer, but the resurgence due to the delta could force customers to think twice.
Some governments or restaurants also require proof of vaccination, a rule that might discourage some customers.
what do they say? “These results were worse than expected, and they will add to concerns about a faltering economic rebound,” said chief economist Carl Weinberg of High Frequency Economics.
Market reaction: The Dow Jones Industrial Average DJIA,
and S&P 500 SPX,
were expected to open lower in Tuesday’s trades.
[ad_2]
Source link