Retail sales slightly increased by 0.2% for June (seasonally adjusted) compared to May. However, these numbers do not include adjustments for price changes. The Consumer Price Index (CPI) also rose 0.2% in June versus May, seasonally adjusted. Categories that did well compared to last month were non-store sales, up 1.9%; furniture sales, up 1.4%; and electronics/appliance stores, up 1.1%. Department stores showed the most significant sales decrease, dropping 2.4%. Total sales for April 2023 through June 2023 were up 1.6% from the same period a year ago.
Leading indicators for a solid second half of year
Consumer spending was up 9% in June, according to data from Affinity Solutions. “Consumers still have accumulated savings, and they are continuing to spend,” said Jonathan Silver, CEO and founder of Affinity Solutions, which tracks over 8.8 billion customer transactions across 4200 brands representing $500 billion in annual spending. During the pandemic, the U.S. government firehosed about $5 trillion into the economy. By the end of August 2021, accumulated excess savings totaled around $2.1 trillion. As of March 2023, there is still an estimated $500 billion of excess savings. “The inflation numbers were less than what economists anticipated at 3% (for the rolling 12 months ending June); the lower unemployment rate of 3.6% and the positive wage growth will help with consumer spending in the year’s second half. People will not have to dip into their accumulated savings, which is a leading indicator of continued consumer spending,” said Silver.
Strong housing market may prompt higher spending in second half
New housing construction experienced an unexpected surge in May, up 21.7% despite rising interest rates. Housing completion rates were up 9.5% in May, contributing to higher furniture and home decor spending. “We are purchasing more durable goods, especially home furnishings and building supplies,” said Silver.
Positive economic factors
Another positive factor in the June data was that lower-income consumers spent 3.2% more than higher-income consumers. “Lower income spending represents 50% of consumer spending, and with strong spending from these consumers, it is another strong and encouraging indicator for the third and fourth quarters,” said Silver. Gas prices were down 32% while spending was down only 16%, implying that people are getting out and driving places. “People tend to look at gas prices as an outsized view of how the economy is doing,” explained Silver. When gas prices fall, American consumers believe the economy is doing well, despite increased prices across other categories. “I am bullish on the second half of the year. The leading indicators are powerful coming out of June; excess savings, higher spending at lower income levels and an increase in housing starts/new construction all bode well for positive sales for holiday and the second half of the year,” said Siver in a personal interview.
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