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An increase in ecommerce sales was among the drivers of an uptick in US retail sales in June.
According to the US Department of Commerce, the total retail sales of $680.6 billion for June was a 1% increase over May. Year-over-year, the total represented an increase of 8.4%. The retail sales numbers came in just slightly above an analyst expectation of a 0.9% increase, CNBC reported.
The retail sales numbers come with the caveat that this data is not adjusted for inflation. Still, their bounce back up from a slight May decline offers evidence that consumers are continuing to spend in the face of rising prices.
Further buoying this sentiment, the Commerce Department also revised upward its data for May. It initially reported a decrease of 0.3%. Now, the Department is reporting a decrease of 0.1% for the month.
Online sales are partially to thank for the June increase. The nonstore sales category, which includes ecommerce, posted the highest month-over-month increase of any category other than gas stations, which are notoriously volatile and have seen massive increases with the rising price of gas. Nonstore sales were up 2.2% month-over-month, and rose 9.6% year-over-year. The growth points toward shoppers continuing to turn to ecommerce, even as in-store foot traffic has picked back up this year. It could reflect that shoppers are turning to ecommerce at a time when gas is expensive, and prices are rising across the economy.
This news arrives on a week when FTI Consulting projected that US ecommerce sales will reach $1 trillion for the first time in 2022, and Amazon Prime Day delivered the top two ecommerce spending days of the year.
Other notable changes came in the following consumer goods categories:
- General merchandise stores, including florists, pet stores and office supply stores: 1.4% month-over-month increase, 15.1% year-over-year increase.
- Furniture stores: 1.4% month-over-month increase, and 4.6% year-over-year.
- Clothing stores decreased 0.4% month-over-month, and fell 0.2% for the year.
- Health and personal care stores declined 0.1% month-over-month, and fell 0.6% year-over-year.
- Electronics stores were up 0.4% month-over-month, while falling 9.1% year-over-year.
As with other consumer metrics, this data is being monitored closely as prices rise at a record clip. Earlier this week, a report from the Consumer Price Index showed that the inflation rate spiked to a new 40-year-high of 9.1%.
The Commerce Department’s monthly report on retail sales is a key measure of demand at a time when the Federal Reserve is taking steps to cool off the economy. The Fed raised interest rates 0.75% in June, and is expected to take action at another meeting later in July. The retail report will be an important factor in determining the size of the interest rate hike, especially given that the Fed appeared to adjust the size of June's hike in the late stages of its decisionmaking process.
“June’s numbers show consumers are powering through price pressures, but inflation is eating away at savings built up during the pandemic and is wiping out recent income gains,” NRF Chief Economist Jack Kleinhenz said, in a statement. “Inflation remains a challenge to consumers trying to make ends meet and will continue to be an issue even if it cools down in the months ahead. Despite that, consumers are holding up notably well and continuing to spend.”
Producer Price Index near record highs
On Thursday, another key economic indicator for consumer goods showed inflation rising. The Producer Price Index, which is a measure of prices for goods at wholesale and other levels before they reach retail, rose 11.3% in year-over-year in June. That was the largest increase since the jump of 11.6% in March, which was the highest spike for this index ever recorded by the US Bureau of Labor Statistics. The increase was mostly pegged to a 10% jump in energy prices.
“Today’s surge in wholesale prices offers companies and consumers little reason to be confident,” said Katie Denis, VP of communications and research at the Consumer Brands Association, in a statement. “Energy prices underpin everything CPG companies do to make and deliver products to consumers, and their ripple effect is showing up in the price of commodities the industry heavily relies on.”
Consumer sentiment hovers around lows
Even as consumers continue to spend, they remain downcast about the economy overall. With a 1.1% increase from the June measure, the initial July reading of consumer sentiment from the University of Michigan was “relatively unchanged, remaining near all-time lows,” wrote UM Survey of Consumers Director Joanne Hsu. More consumers are blaming inflation for eating away at their living standards, matching levels seen during the Great Recession. Additionally, the belief that one should make a purchase now to avoid higher prices later gained a stronger foothold.
Taken together, this week's data points to an economic picture where consumers are spending, but they're doing so with some hesitation about rising prices, and less certainty about what's ahead.
Trending in Economy
Labor disputes on the West Coast could cause further disruption heading into peak season.
When the first half of 2023 is complete, imports are expected to dip 22% below last year.
That’s according to new data from the Global Port Tracker, which is compiled monthly by the National Retail Federation and Hackett Associates.
The decline has been building over the entire year, as imports dipped in the winter. With the spring, volume started to rebound. In April, the major ports handled 1.78 million Twenty-Foot Equivalent Units. That was an increase of 9.6% from March. Still it was a decline of 21.3% year over year – reflecting the record cargo hauled in over the spike in consumer demand of 2021 and the inventory glut 2022.
In 2023, consumer spending is remaining resilient with in a strong job market, despite the collision of inflation and interest rates. The economy remains different from pre-pandemic days, but shipping volumes are beginning to once again resemble the time before COVID-19.
“Economists and shipping lines increasingly wonder why the decline in container import demand is so much at odds with continuous growth in consumer demand,” said Hackett Associates Founder Ben Hackett, in a statement. “Import container shipments have returned the pre-pandemic levels seen in 2019 and appear likely to stay there for a while.”
Retailers and logistics professionals alike are looking to the second half of the year for a potential upswing. Peak shipping season occurs in the summer, which is in preparation for peak shopping season over the holidays.
Yet disruption could occur on the West Coast if labor issues can’t be settled. This week, ports from Los Angeles to Seattle reported closures and slowdowns as ongoing union disputes boil over, CNBC reported. NRF called on the Biden administration to intervene.
“Cargo volume is lower than last year but retailers are entering the busiest shipping season of the year bringing in holiday merchandise. The last thing retailers and other shippers need is ongoing disruption at the ports,” aid NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “If labor and management can’t reach agreement and operate smoothly and efficiently, retailers will have no choice but to continue to take their cargo to East Coast and Gulf Coast gateways. We continue to urge the administration to step in and help the parties reach an agreement and end the disruptions so operations can return to normal. We’ve had enough unavoidable supply chain issues the past two years. This is not the time for one that can be avoided.”