July retail sales are mixed, according to Commerce and NRF

United States July retail sales were again mixed, according to data issued respectively today by the United States Department of Commerce and the National Retail Federation (NRF).

Commerce reported that July retail sales—at $617.7 billion—were off 1.1% compared to June’s revised $624.7 billion and topped July 2020 by 15.8%. And it added that total retail sales from May through July saw a 20.6% annual increase.

Looking at specific verticals, Commerce reported that retail trade sales were off 1.5% annually and up 13.3% annually, whereas clothing and clothing accessories stores up 43.4% annually, and food services and drinking places rose 38.4%, ostensibly benefitting from improved economic conditions compared to a year ago, even though the Delta variant has been an increasing concern for businesses.

The NRF reported that its calculation of retail sales, which does not include automobile dealers, gasoline stations, and restaurants, showed that July was off 1.1% on a seasonally-adjusted basis compared to June and up 15.8% annually compared to June, and was up 9.5% on an unadjusted basis annually. And on an unadjusted year-over-year basis on a three-month moving average through July, retail sales were up 13%.

Over the first seven months of 2021, retail sales as calculated by the NRF headed up 15.5% annually, which NRF said is consistent with its revised 2021 retail sales forecast, of between 10.5%-to-13.5%, to between $4.44 trillion and $4.56 trillion.

“Despite this monthly dip, the economy has rebounded quite well and is more than just on the mend,” NRF Chief Economist Jack Kleinhenz said in a statement. “The consumer has continued to be resilient and recent price increases brought on by constraints in the supply chain have not dampened the robust demand seen during the past year. If retailers could find more inventory, they could sell it. Going forward, consumers are a bit fearful again as we approach another possible wave of COVID-19 infections, but they’ve learned to live with the virus and shopping continues. The delta variant could impact local markets, especially where vaccination rates are low, but doesn’t appear likely to show up in the national data.”

The shift to spending on services was expected as more of the economy reopened, and this year’s move of the Amazon Prime Day promotion to June may have siphoned off some sales that normally come in July, noted NRF, with Kleinhenz observing that consumer finances are in good shape with a cushion from paying off debt and building up savings. Employment and wages have seen recent back-to-back increases, and advance child tax credit payments going out for the second month in a row should provide a bump for spending, and solid back-to-school spending contributed to July’s results and is expected to spill over into August, too, according to NRF.

In a research note, Neil Saunders, Managing Director of GlobalData, commented that on a two-year basis, retail sales are up by 19.7% or by $104.9 billion, with the sector remaining comfortably above pre-pandemic levels.

“However, there is now a very clear sign that the momentum which has propelled the sector over the few months or so is slowing and that growth rates are moderating as a result,” he wrote. “To be clear, this is not catastrophic and it in no way signals anything near a contraction for retail, it just means that the 25% plus growth seen in March, April and May will become a thing of the past. None of this should come as any surprise as some of the drivers of exceptional demand, including the stimulus windfall and enhanced benefits, are now unravelling. This, along with inflation, has made consumers more conscious about their spending. On top of this, concerns about the delta variant have also weighed down consumer sentiment which has taken some of the luster off the reopening dividend.”