Retail sales picked back up in June. But just as important as how much money Americans spent last month is where they spent it.
The Commerce Department on Friday reported that retail sales — spending at stores, restaurants and online — rose 0.6% in June from a month earlier, partially reversing May’s 1.7% decline. Sales might have been stronger if some retailers had the inventory to meet demand. Sales at car dealers, which have been struggling to fill their lots as a result of the semiconductor shortage that has slowed auto production, fell 2% last month after falling 4.7% in May. Sales at furniture stores, which have also been hampered by supply-chain troubles, dropped 3.6%.
But on balance, there were more bright spots in the report than dark ones. Among them, sales at food services and drinking places (basically restaurants and bars) rose 2%, sales at clothing and accessory stores rose 2.6% and sales at department stores rose 4.6%. That is reflective of how spending has shifted as the pandemic’s grip on the economy has lessened. People are dining out more and heading back to the mall.
Moreover, this shift in spending patterns is probably only partially reflected in the retail sales figures. The only category in Friday’s report that counts as services spending is restaurants and bars, but their sales only count for about 11% of the report’s measure of sales. Overall services spending, which includes everything from housing costs to dental visits to hair cuts, accounts for about two thirds of overall consumer spending. And many of the services categories not included in the retail sales report, such as hotel stays, airfares and movie tickets, are probably registering reopening-related spending increases.
The upshot is that even as retail sales rose in June, overall consumer spending probably rose by even more.
How the changes in spending play out over the next several months will be something to watch. Services spending certainly has a lot of ground to make up—adjusted for inflation, it was still 4.2% below its pre-pandemic level in May, Commerce Department figures show. Spending on goods rose 15.9% over the same period.
It seems likely that overall spending on services will be rising faster than goods spending, though there could be a lot of variation on spending within goods categories. With most school-age children back to in-class learning this fall, for example, back-to-school spending could be strong. People’s need to refresh their closets before going back into the office could provide additional support for apparel spending.
But discretionary goods that sold well during the pandemic, such as videogame consoles, might not do so well now that people have more available discretionary services to spend their money on. Rising goods prices could play a role, too—some people really need to replace their old car, but others might wait out the chip-shortage hitting car makers and take a nice trip instead.
Write to Justin Lahart at firstname.lastname@example.org
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