Overall retail sales rose 0.5% from May and 6.6% year over year, with car sales helping move the needle, according to the report. The estimate for overall May sales was revised upward from a 0.8% gain to a 1.3% gain, according to the report.
As usual, different segments saw varied results, according to the government’s report. Apparel sales fell 2.5% from May and rose 4% year over year; department stores fell 1.8% from May and were flat year over year; furniture and home goods sales rose 0.6% from May and 4.8% year over year; and electronics and appliance sales fell 0.4% from May and rose 2.1% year over year.
June tends to be a sunny month for retail sales, and the U.S. economy barreling along on all cylinders is helping to brighten that.
“June is typically a major summer selling month, with transition to summer clearance late in the month,” Retail Metrics President Ken Perkins said in comments emailed to Retail Dive. “Back-to-school looms just around the corner in much of the South. Weather conditions were generally favorable across the country, unlike the first four-plus months of this year.”
Wariness around the Trump administration’s trade policies haven’t yet overwhelmed consumer confidence, he also said, thanks to increases in wages that had eluded hourly workers even as the effects of the Great Recession receded in recent years. Several states and municipalities have instituted minimum wages that far exceed the federal minimum of $7.25 per hour. Average hourly earnings in June were up 2.7% year over year, and the Atlanta Fed Wage Tracker exceeded 3% almost every month over the past three years, according to Retail Metrics’ report.
“The spending backdrop for retailers is in the most favorable range it’s been in since the Great Recession,” Perkins said. “All monthly retailers are projected to turn in positive June same-store sales growth… [and] second quarter comps are projected to increase 2.7%.”
But that’s down sequentially from 2.9% in the first quarter and 3.3% in the fourth quarter last year, he also said, warning that comp sales at many retailers could paint a darker picture for the coming weeks. Retail Metrics is forecasting second quarter same-store sales to rise 2.7%, off 20 basis points from 2.9% in late June. Indeed, pure retail’s share of all retail spending fell to its lowest proportion in over four years, according to research from GlobalData Retail.
“This suggests that while retail is doing well thanks to a robust economy, it is not necessarily benefiting from gains as much as other categories,” GlobalData Managing Director Neil Saunders warned in an email to Retail Dive. Rising gas prices explain that, but only somewhat, he said, adding that consumers continue to budget more for experiences than for accumulating things.
“A lot of retailers are still not providing a good enough experience or a compelling enough range of products to persuade consumers to be more profligate,” he said, noting that wage growth remains moderate, consumer confidence is slipping and second-half comparisons are about to get tougher for retailers.
“Should this period of economic good fortune come to an end, retail will be one of the areas consumers quickly de-prioritize and cut back on,” he said. “For all of these warnings, we do not believe retail will perform terribly. However, we do think there are some chill-winds on the horizon that could reverse the bounce back in some traditionally weak sectors like department stores. Just as a rising tide floats all boats, an ebbing tide has the potential to ground some vessels.”