MNI REALITY CHECK: US June Retail Sales Look To Power Higher

--Sales Set To Record Two-Decade High Bar May Lockdown Unwind

By Brooke Migdon

     WASHINGTON (MNI) - U.S. retail sales will likely rise sharply in June as

more state re-openings released pent-up demand and government relief programs

continued to boost spending power, industry leaders told MNI.

     Financial markets expect sales to increase 5.0% in June, the largest

single-month percent increase in nearly two decades outside of May's

record-shattering 17.7% increase, with potential for an upside surprise.

     However, sales are expected to come back under pressure in July, as more

states slip back into lockdown measures.

     Key points from industry leader comments ahead of the July 16 report:

     **Apparel sales likely stabilized in June after rising by an unprecedented

188% in May. Brick-and-mortar sales remained largely unchanged, but e-commerce

sales surged, which could put some upward pressure on Thursday's figures.

     **Higher gasoline prices and fuel demand should keep gas station sales high

in June, though rising infection rates in some of the nation's largest

gasoline-consuming states could put significant downward pressure on sales

through July.

     **Overall sales remained elevated through most of the month as state

re-openings freed pent-up demand from lockdowns. Surging Covid-19 cases in

southern states prompted another round of business closures in the final week of

June, dimming the prospects for sustained growth through the summer.

     MICHELLE KREBS, ANALYST, AUTOTRADER

     Vehicle sales continued to increase in June following state re-openings

after months-long Covid-19 shutdowns, though sales slowed noticeably in the

latter half of the month, she told MNI.

     "Volatile" consumer confidence and stubbornly high initial jobless claims

levels will likely hamper sales through July, she said.

     Tightening inventory is unlikely to keep pace with demand, putting downward

pressure on future sales numbers, she said.

     JACK KLEINHENZ, CHIEF ECONOMIST, NATIONAL RETAIL FEDERATION

     "Consumer spending is related certainly to employment, and we've seen two

months of record-breaking employment," he told MNI in an interview. "That's

wholesome for consumer attitudes."

     There's been a "divergence in activity in just the last 2-3 weeks,"

Kleinhenz said, referencing business closures in southern states and reversed

re-openings in other regions because of rising coronavirus infections.

     "If these outbreaks that we're seeing right now precipitate additional

closures, these will be significant speed bumps for the economy," he said. "And

we're still far from normal as it is."

     Kleinhenz said the June numbers could be stronger than expected because of

pent-up demand from the delayed effects of state re-openings and a sizable

amount of savings, in part due to stimulus checks from the government.

     "Don't count the consumer out," he said. "They'll surprise you every time."

     PATRICK DE HAAN, HEAD OF PETROLEUM ANALYSIS, GASBUDDY

     "June was a good month, probably the best month for gasoline demand since

March," he told MNI in an interview. "But as we closed out the month there might

have been a bit of a hiccup."

     De Haan said gasoline demand dropped off in the final 7 days of the month,

likely due to spiking new Covid-19 cases in states like Texas, Florida and

California, which are among the largest consumers of gasoline in the nation.

     Currently, gasoline consumption in the U.S. is likely "down somewhere in

the low 20% range from a year ago because of those three states," he said.

     Overall, demand for gasoline approached pre-coronavirus levels in June, De

Haan said, pushing up the price of fuel -- and sales numbers with it.

     GARY RAINES, CHIEF ECONOMIST, FOOTWEAR DISTRIBUTORS AND RETAILERS OF

     AMERICA

     Shoe stores nationwide saw positive growth through most of June, he told

MNI, though there might be another "dark cloud" looming as positive Covid-19

cases surge in several states and government relief programs are set to expire

at the end of the summer.

     "The June numbers will look pretty good, particularly compared to April"

when sales bottomed out, he said. "But I'm not so upbeat about July and August."

     Raines said demand faltered markedly in June in the south, which accounts

for roughly 40% of total brick-and-mortar footwear sales.

     E-commerce sales continued to skyrocket in June, rising close to 60%

year-over-year in most weeks of the month, he noted.

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

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