By Natalie DeCoste
Bad news for U.S. retailers as the new numbers for retail sales show that shoppers cut back on their purchases more than expected in July.
Retail sales for July fell 1.1%, worse than the Dow Jones estimate of a 0.3% decline. Retail sales are a measure of purchases at stores, at restaurants, and online. In dollar terms, retail sales were $617.7 billion for July compared to June’s revised total of $624.7 billion.
The number is a decline from the June 2021 figures but remains above the July numbers of the previous year when the pandemic was in full swing. Compared to July 2020, retail sales were up 15.8%.
“Total sales for the May 2021 through July 2021 period were up 20.6 percent (±0.5 percent) from the same period a year ago. The May 2021 to June 2021 percent change was revised from up 0.6 percent (±0.5 percent) to up 0.7 percent (±0.2 percent),” read the Commerce Department’s retail report.
When the automotive category is excluded from the data received by the Commerce Department, the decline in sales is only 0.4%, meaning that the auto industry saw a 3.9% decline during July. The auto industry has been particularly hard hit by supply chain issues which have limited the available inventory for car buyers.
In July, sales in the clothing and clothing accessory category were down by 2.6%, while sales fell by 1.2% in the building and garden supply category. Even the online sales category, a strong force during the pandemic as consumers took to shopping online, posted a 3.1% decline.
A few increases in sales were also seen in the report. With rising energy prices across the country, gasoline sales increased 2.4%. Restaurants and bars also managed to come out of July on the plus side with an increase in sales of 1.7% over the month.
The decline in retail sales is a bad sign for the U.S. economy as consumers make up nearly 70% of all activity in the U.S., which makes retail sales a good proxy to gauge overall economic health. The drop in sales is reportedly tied to consumer concerns over the rise of the new coronavirus delta variant and the impact the new variant will have on the economy. Surging coronavirus numbers have caused delayed school re-openings and pushed back return to office plans, disrupting consumer expectations.
A survey from the University of Michigan showed a steep drop in consumer sentiment during early August. Richard Curtin, the survey’s chief economist, said that the decline was due “mainly from dashed hopes that the pandemic would soon end.”
Another contributing factor to decreased retail sales is the disappearance of federal aid to households. In the second quarter, U.S. consumer spending rose at a hefty 11.8% annual rate, padded by government stimulus checks.
Unemployment benefits are set to come to an end after Labor Day as well. Roughly 7.5 million Americans will lose these benefits, meaning that these individuals could tighten up their purse strings.
