WASHINGTON, D.C.: Despite declining motor vehicle purchases and supply constraints driven by higher demand, the Commerce Department on Friday reported a rebound in U.S. retail sales in June, even as spending on services grew.
"Growing pains from reopening are on the supply side," said Chris Low, chief economist at FHN Financial in New York. "Inflation reports earlier this week confirm firms are still struggling to keep up with this demand, but another month of high retail spending should give companies confidence that consumer demand is not slowing down anytime soon," as quoted by Reuters.
Sales advanced 18 percent compared to June last year, and is now 18.0 percent above their pre-pandemic level. Retail sales mostly include the goods component of consumer spending, with services such as healthcare, education, travel and hotel accommodation making up the remaining portion. Restaurants and bars are the only services category in the retail sales report.
Though concerns about inflation hurt consumer sentiment this month, spending was likely to remain underpinned by record savings and rising wealth.
The government reported this week that consumer prices increased by the most in 13 years in June, while producer prices accelerated.
"Consumers are flush with cash and their credit card utilization rates and debt burdens have dropped," said Scott Hoyt, senior economist at Moody's Analytics in West Chester, Pennsylvania, as reported by Reuters. "Lack of available cash or credit to spend is as small a restraint on spending as it ever is. Combined with massive forced savings, wealth is likely higher than it would have been without the pandemic."
Receipts at auto dealerships fell 2 percent after declining 4.6 percent in May, but sales at clothing stores increased 2.6 percent and those at services stations also rose, reflecting increased mobility and higher gasoline prices.
Also, consumers increased spending at restaurants and bars, leading to a 2.3 percent rise in receipts.
Online retail sales rose 1.2 percent, while sales at electronics and appliance stores also rose 3.3 percent.
"Heading into the back-to-school season, we expect record sales as families purchase electronics, shoes and backpacks for in-person learning this year," said Matthew Shay, president of the National Retail Federation, as reported by Reuters.