Despite months of on and off worries of recession — when inflation and a big jump in interest rates was expected to sap strength from consumers — shoppers are shopping on.
But they’re not spending everywhere, as department stores continued logged declines, according to the Census Bureau’s latest monthly reading.
June sales at department stores fell 5.2 percent from a year earlier and the sector was down 1.1 percent the first half of the year. Apparel and accessories specialty stores fared better with a 0.7 percent increase for June and a 1.1 percent rise for the year so far.
The overall message is one of continued consumer momentum.
June retail and food service sales rose 1.5 percent from a year earlier.
Seasonally adjusted sales depicting the change since May, showed a 0.2 percent increase, less than the 0.6 percent jump economists projected, according to FactSet. But sales in the control group, which removes food service, gas, building materials and motor vehicles, came in with a 0.6 percent gain, better than the 0.5 percent economists had penciled in.
Taken together with the Consumer Price Index’s reading of inflation last week showing that price gains slowed to 3 percent in June from 9 percent a year earlier, hopes are rising that the economy could some in for a soft landing after years of pandemic disruption.
That would mean that inflation continues to come down — and stays down — while consumers continue to spend and the labor market remains strong. The unemployment rate is currently standing at an ultra low 3.6 percent.
“The bottom line: The consumer continues to spend; each time there is an expectation that consumption will pull back, consumers thumb their nose at those expectations,” said Mike Graziano, consumer products senior analyst at RSM US, in an analysis. “As long as the labor market remains strong, consumers are likely to spend.
“This does not minimize the real impact that inflation and other macroeconomic factors have had on consumers on the lower end of the income scale; however, there’s still broad confidence to spend given the labor market,” Graziano said. “Excess savings of approximately $670 billion — concentrated to the top income earners — continue to provide the backstop needed against full scale consumer pullback.”
Still, it remains to be seen just where those excess dollars in the top earners’ piggy banks go.
After the U.S. helped luxury companies power through last year, Americans have proven to be a soft spot for the big luxury players.
Compagnie Financière Richemont reported that its first quarter sales in the Americas region fell 2 percent at constant rates, a decline attributed to wholesale sales. And last week, Burberry said its U.S. sales dropped by 8 percent for the first quarter with aspirational shoppers pulling back.