U.S. Retail Sales Rose 1% in June
June’s increase came after sales declined slightly in May, the Commerce Department said Friday.
Consumers spent more last month across a broad range of goods, including furniture, groceries and gas. They also spent more at restaurants. Spending declined at building-supply, clothing and department stores.
Some of the growth in retail sales last month likely reflects that consumers were paying higher prices for goods and services.
Unlike many other economic-data reports produced by the U.S. government, retail sales aren’t adjusted for inflation. That means higher retail-sales figures can reflect higher prices rather than more purchases.
Annual inflation was 9.1% in June, the fastest pace in more than 40 years.
Businesses are adding jobs at a solid clip and workers are receiving wage increases. Household finances are also remarkably strong. Those factors are helping position consumers to continue spending as inflation surges, economists say.
“The consumer has the ability to navigate these price increases,” said
Michelle Meyer,
chief U.S. economist at the Mastercard Economics Institute. “But clearly there is some frustration.”
High inflation has taken a toll on consumer sentiment in recent weeks. The University of Michigan’s index of consumer sentiment hit its lowest level on record in June, with nearly half of surveyed consumers blaming inflation for eroding their living standards.
Consumer spending is the main driver of the economy. Spending surged throughout much of the pandemic, but it now shows signs of cooling. A separate spending report from the Commerce Department, which will publish June data later this month, includes details on services spending. That report showed consumer spending grew 0.2% in May, a sharp slowdown from 1.9% growth in January.
Other parts of the economy have weakened in recent months. Manufacturing output declined in May, according to a Federal Reserve report. Home construction is slowing as the Federal Reserve attempts to pull down inflation through aggressive interest-rate increases.
A couple of key factors could hurt retail sales: For one, purchases of goods have shown signs of easing as consumers pivot their spending more to experiences they missed out on earlier in the pandemic, such as travel. Second, some consumers are foregoing purchases or seeking out cheaper products.
“People are starting to feel inflation in their pockets, their dollars not going as far as they did,” said
James Knightley,
ING’s chief international economist.
Deborah Banigan, 71 years old, said she has taken steps large and small to cope with higher prices. She used to buy frozen entrees, an easy meal to prepare. “Stick it in the microwave, have a salad and a glass of wine or a beer and that was a nice evening meal,” Ms. Banigan said.
But she hasn’t bought a frozen meal in a few months because prices have shot up, she said. In recent months, Ms. Banigan has shifted to making more casseroles from ingredients including canned tuna and boxed pasta. She also fills capsules with coffee herself for her Keurig machine. That saves her money over purchasing pre-filled capsules, known as K-Cups.
Higher gas prices drove Ms. Banigan to trade down to a Ford EcoSport, which gets better mileage than her former vehicle, a Ford Escape sport-utility vehicle. “It doesn’t have a lot of horsepower, but it does the job,” she said.
As inflation climbs in the U.S., rising food costs have helped push the nation’s most popular price index to its highest level in four decades.
Photo:
Joe Raedle/Getty Images
General Mills Inc.,
maker of Cheerios cereal and Betty Crocker cake mix, said higher prices helped lift sales in its fiscal fourth even though the food maker sold fewer items across the board.
Consumers are eating more at home, rather than at restaurants, said
Jeff Harmening,
chief executive of General Mills, in a fourth-quarter earnings call with analysts in June.
“Consumers are still spending quite a bit of money,” Mr. Harmening said. “Now as they look ahead, they get nervous because they see inflation and so forth. But right now, the consumer is in a decent place.”
It isn’t clear how long growth in consumer spending can continue in the face of inflation. Even though job openings abound and unemployment is historically low, many Americans find their cost of living is rising faster than the income they are bringing home.
Ms. Banigan is heading back to the workforce as a cashier at a big-box store, which she expects will help supplement her income. But if any unexpected expenses crop up, Ms. Banigan said her financial situation could get dicey quickly.
“If I have one medical emergency or one of my cats has a medical emergency, that’s it,” Ms. Banigan said. “It will be a choice between the groceries and Deborah’s medical bills or the cat’s vet bills.”
Write to Sarah Chaney Cambon at [email protected] and Rina Torchinsky at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
June’s increase came after sales declined slightly in May, the Commerce Department said Friday.
Consumers spent more last month across a broad range of goods, including furniture, groceries and gas. They also spent more at restaurants. Spending declined at building-supply, clothing and department stores.
Some of the growth in retail sales last month likely reflects that consumers were paying higher prices for goods and services.
Unlike many other economic-data reports produced by the U.S. government, retail sales aren’t adjusted for inflation. That means higher retail-sales figures can reflect higher prices rather than more purchases.
Annual inflation was 9.1% in June, the fastest pace in more than 40 years.
Businesses are adding jobs at a solid clip and workers are receiving wage increases. Household finances are also remarkably strong. Those factors are helping position consumers to continue spending as inflation surges, economists say.
“The consumer has the ability to navigate these price increases,” said
Michelle Meyer,
chief U.S. economist at the Mastercard Economics Institute. “But clearly there is some frustration.”
High inflation has taken a toll on consumer sentiment in recent weeks. The University of Michigan’s index of consumer sentiment hit its lowest level on record in June, with nearly half of surveyed consumers blaming inflation for eroding their living standards.
Consumer spending is the main driver of the economy. Spending surged throughout much of the pandemic, but it now shows signs of cooling. A separate spending report from the Commerce Department, which will publish June data later this month, includes details on services spending. That report showed consumer spending grew 0.2% in May, a sharp slowdown from 1.9% growth in January.
Other parts of the economy have weakened in recent months. Manufacturing output declined in May, according to a Federal Reserve report. Home construction is slowing as the Federal Reserve attempts to pull down inflation through aggressive interest-rate increases.
A couple of key factors could hurt retail sales: For one, purchases of goods have shown signs of easing as consumers pivot their spending more to experiences they missed out on earlier in the pandemic, such as travel. Second, some consumers are foregoing purchases or seeking out cheaper products.
“People are starting to feel inflation in their pockets, their dollars not going as far as they did,” said
James Knightley,
ING’s chief international economist.
Deborah Banigan, 71 years old, said she has taken steps large and small to cope with higher prices. She used to buy frozen entrees, an easy meal to prepare. “Stick it in the microwave, have a salad and a glass of wine or a beer and that was a nice evening meal,” Ms. Banigan said.
But she hasn’t bought a frozen meal in a few months because prices have shot up, she said. In recent months, Ms. Banigan has shifted to making more casseroles from ingredients including canned tuna and boxed pasta. She also fills capsules with coffee herself for her Keurig machine. That saves her money over purchasing pre-filled capsules, known as K-Cups.
Higher gas prices drove Ms. Banigan to trade down to a Ford EcoSport, which gets better mileage than her former vehicle, a Ford Escape sport-utility vehicle. “It doesn’t have a lot of horsepower, but it does the job,” she said.
As inflation climbs in the U.S., rising food costs have helped push the nation’s most popular price index to its highest level in four decades.
Photo:
Joe Raedle/Getty Images
General Mills Inc.,
maker of Cheerios cereal and Betty Crocker cake mix, said higher prices helped lift sales in its fiscal fourth even though the food maker sold fewer items across the board.
Consumers are eating more at home, rather than at restaurants, said
Jeff Harmening,
chief executive of General Mills, in a fourth-quarter earnings call with analysts in June.
“Consumers are still spending quite a bit of money,” Mr. Harmening said. “Now as they look ahead, they get nervous because they see inflation and so forth. But right now, the consumer is in a decent place.”
It isn’t clear how long growth in consumer spending can continue in the face of inflation. Even though job openings abound and unemployment is historically low, many Americans find their cost of living is rising faster than the income they are bringing home.
Ms. Banigan is heading back to the workforce as a cashier at a big-box store, which she expects will help supplement her income. But if any unexpected expenses crop up, Ms. Banigan said her financial situation could get dicey quickly.
“If I have one medical emergency or one of my cats has a medical emergency, that’s it,” Ms. Banigan said. “It will be a choice between the groceries and Deborah’s medical bills or the cat’s vet bills.”
Write to Sarah Chaney Cambon at [email protected] and Rina Torchinsky at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
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