July 13, 2024
Retail sales were unchanged in June after rising 0.3% in May. In the past year retail sales have risen 2.2%. However, retail sales have been essentially unchanged since the end of last year.
Motor vehicle sales fell 2.0% in June after rising 1.0% in May. the drop in June sales reflects the result of a computer hack that delayed dealer deliveries to customer. As a result, the June decline should be reversed in July. In the past year car sales have fallen 1.5%.
Retail sales ex autos and gas, which eliminates the two most volatile components and is a better gauge of the trend pace of sales, rose a solid 0.8% in June after climbing 0.3% in May. In the past year this so-called core spending pace has risen 3.8%, but in the first five months of this year it has climbed at a 2.0% pace. Clearly, the pace of consumer spending is beginning to slow as higher inflation and falling real income finally begins to take its toll.
Restaurant sales rose 0.3% in June after climbing 0.4% in May. In the past year restaurant sales have risen 4.6%. But since the end of last year restaurant sales have actually declined slightly. Given the dramatic runup in food prices in 2022 and 2023 it appears that diners are choosing to dine out less often and/or choose less expensive restaurants to patronize.
Sales at nonstore retailers jumped 1.9% in June after climbing 1.1% in May.. In the past year nonstore sales have risen 8.8%. That has slowed to 5.5% in the first six months of this year which is still a pretty solid pace. Consumers continue to shop online.
The problem is that inflation has been rising more quickly than sales and, as a result, real retail sales have been declining in real terms. Our income has been rising and we kept spending, but the amount of goods and services we were able to purchase with our fatter paycheck was somewhat less than it was a year ago. Real retail sales were unchanged in June after rising 0.3% in May. Real sales have declined 0.4% in the past year. They have declined at a 2.5% pace in the first half of 2024.
GDP seems on track to increase 1.9% in the second quarter as firms keep creating a respectable number of jobs each month, and the unemployment rate remains at 4.1% which is very close to the 4.0% full employment threshold. However, consumers are running up their credit card bills in the process in an effort to maintain their style of living. Unfortunately, credit cards are a very expensive way to add debt. By doing so, it is clear that the consumer is beginning to struggle. We are apparently seeing signs that consumer spending is finally beginning to slow.
Stephen Slifer
NumberNomics
Charleston, SC
Hi Steve,
How much of the $2T is going to large corporations vs small business?
Hi Brian,
There are tons of different pieces to that program. But it appears to me that the only “big business” that is getting money is the airline industry. Here are some of the highlights:
1. Every taxpayer receives $1,200 check. $500 extra per kid.
2. Unemployed workers get extgra $600/ week for up to 4 months. When couple with state benefits, some will be making more on unemployment than on their day job.
3. Hospitals get $100. Losing money because they are forced to postpone elective surgeries which is wher they make their money. I think they also get a bigger reimbursement from Social Security for treating COVID19 patients.
4. Airlines get $29 billion in grants, $29 billion in loans.
5. Small businesses get tax credit if they keep workers on the payroll.
6. State and local governments get $150 billion. They are losing sales tax and corporate profits + they have expenses involved with the corona virus like police, fire, EMT.
7. Defense Dept. gets $10.5 billion for deploying National Guard to distribute medical supplies, food, etc.
8 Employers get to defer the 6.25% payroll tax which is their portion of funding Social Security.
9. Payments in there for telemedicine, food stamps, farmers.
A little something for everybody.
Steve
Hello Steve,
I pray for a weak covid episode and a quick recovery!
I had some time to kill yesterday before a dentist appointment so I went by an outdoor store in North Charleston and Tanger mall. In both cases, I could’ve rolled the bowling ball down the aisles and never hit a person. This was around 11 o’clock in the morning yesterday not a very good gauge on retail activity, but still these are gathering points for customers. My guess is a lot of the Retail sales growth is online sales.
Hi Neil,
Mary and I went to the Tanger outlet in Bluffton a few weeks ago. It seemed fairly busy, but not like what it used to be a decade or so ago. And you are right that the bulk of recent sales are on-line. For example in March total retail sales rose $5.l billion of which $3.3 billion came from on-line sales. Thus two-thirds of the growth in sales came from on-line retailers which account for just 17.3% of total sales. For what it is worth, just prior to the recession (December 2019) on-line sales were 12.3% of the total. They have increased market share by about 1.0% per year in each of the past four years. Impressive.