• Strong sales pattern since March remains intact.

  • Department Stores led all in monthly sales gains, as consumers returned to brick-and-mortar shopping.

  • In contrast, Building Materials stores registered their third straight monthly decline, off 10% since the March.

By Manuel Gutierrez, Consulting Economist to NKBA

Total retail sales increased by an unexpected 0.6% in June, following a 1.7% drop in May. Despite June’s gain to $621 billion, retail sales are still tracking a bit below the all-time peak reached in April, when consumers spent $629 billion in retail stores and online. The May sales figure was actually revised down to that 1.7% drop.

“Retail store sales bounced back in June to $621 billion, nearing April’s all-time highs.”

June’s increase, seen in Figure 1, still comes in at a lower volume than in either March or April. But it offers hope to some economists that the nation may be witnessing the start of a solid economic recovery.

On a cautionary note, however, there are still millions of people who are either unemployed or who have left the workforce altogether.

Also, the pace of price inflation continues to accelerate, reaching 5.3% in June, the highest level in 13 years. On top of this, the University of Michigan’s index of consumer sentiment fell sharply in early July, mostly on fears of inflation.

June’s largest increase was at Department Stores, where sales rose a strong 5.9% (Figure 2). This may reflect consumer thirst for shopping in person, at brick-and-mortar stores after months of forced isolation.

The second largest increase was at Miscellaneous Stores, which rose 3.4% for the month. Despite the large percentage increases, these two categories are minor components of total retail volume. Their combined sales for June were under $26 billion, or just 4% of total retail sales.

Other categories showing strong increases were Electronics & Appliances stores, up 3.3%, and Restaurants & Bars, with a gain of 2.3%.

Sales in these stores exceed the 18% annual increase in total sales (right panel, Figure 2).

Sales of Autos & Other Vehicles fell 2% in June, although they are still 21% higher than last year. The current sales level has been impacted by rapidly rising prices of automobiles combined with a supply shortage. This is a very important category, given that auto sales represent one in five retail dollars.

A category important to K&B is Building Materials stores, where sales fell 1.6% in June to $39.2 billion (Figure 3). It should be noted that these stores also sell to construction companies in the non-residential sector, which has been generally declining since the beginning of last year, when the pandemic forced many people who could work from home to do so — lessening the need for new commercial space. Business investment in structures has fallen nearly 16% over the last year for virtually all types of buildings. The only notable exception is construction of Warehouses (e.g., Amazon) which is up 8% over the past year.

June’s drop in sales of building materials follows two months of larger declines. Taken together, sales at building materials stores are down nearly 10% from the all-time peak of $43.5 billion reached in March.

Given the current situation of price increases and shortages of materials and supplies, a strong rebound in sales at building materials stores is not expected in the near future.

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