MNI REALITY CHECK: US July Retail Sales Seen Slipping

The pace of retail sales faltered slightly in July as spending shifted away from goods toward services as in-person activities resumed, industry experts told MNI, although sales should still get a lift from back to school shopping and stronger-than-expected job growth.

"It's possible that we could see a little deceleration in overall retail sales," said Jack Kleinhenz, chief economist at the National Retail Federation.

Retailers have been expecting spending to move away from goods toward services through the summertime, Kleinhenz said, and household purchases of big-ticket items like vehicles and furniture, mostly made earlier this year, don't typically happen more than just a few times a year. Back to school shopping through July should push up receipts at clothing and clothing accessory stores, general merchandise and department stores, and electronics and appliance stores, Kleinhenz added, as many schools return to in-person learning this fall.

Retail sales in July continued to benefit from pent up demand despite higher prices for goods, Kleinhenz said, noting that gains in food prices should be particularly "evident" in the Commerce Department's July retail sales data.

"I don't think inflation is likely to ease for a while," he said, noting that savings put aside earlier this year from things like federal relief checks mean consumers are able to "do a pretty good job of dealing with it."

Job gains over the past two months, totaling close to 2 million, should also help bolster income, he said.

VEHICLE SALES SLIP

New vehicle sales continued to slow in July, Michelle Krebs, an analyst at Autotrader, told MNI, falling to an annualized pace of 14.8 million following June's drop to 15.4 million.

Sales slumped as standard summer factory shutdowns began, further slowing production, and inventory remained tight, she said. That's putting more upward pressure on prices, with the average listing price of a new vehicle up to a record USD41,729 and the average listing price of a used vehicle up to a record USD25,437.

Still, the days' supply of new vehicles improved in July, rising to 31 days from a record low 29 days in June, according to data from Cox Automotive, the parent company of Autotrader and Kelley Blue Book. But that's only because sales are declining.

Sales of used vehicles also declined in July, falling to a seasonally adjusted annual rate of 38.5 million from June's 39 million pace. That's down from 44.8 million one year ago.

GAS STATION SALES UP

Retail gasoline sold through July improved solidly over June, said Patrick De Haan, head of petroleum analysis at Gasbuddy, with gallons sold up 4.17%.

"July is probably going to be the banner month for gasoline consumption," he said. "There's been a lot of pent up demand to get out for the prime of the summer travel season."

De Haan said he saw "no restraints on demand at all" through July, and consumers were undeterred by high fuel costs. The price of gasoline rose 2.4% in July, according to the Bureau of Labor Statistics' July CPI report.

Still, fuel demand on average has yet to recover to pre-Covd levels, De Haan said, and might not ever climb that high again.

With many Americans still working from home, the typical daily commute has likely "permanently changed," he said, seeing delayed office reopenings as a final "roadblock" to gasoline demand returning to normal.

"If offices were reopened, I think the seeds are there that we would see record gasoline consumption," he said.

Headline retail sales are expected to fall 0.3% after June's 0.6% gain, according to Bloomberg. Excluding vehicle sales, retail sales should increase 0.2% after growing 1.3% in June, while sales excluding vehicles and gas station sales should remain unchanged.