July Retail Sales Slow, But Demand Continues as Consumers Learn to ‘Live with the Virus’

Retail sales in July are complicated. Sales slowed during July as retailers continued to face supply chain disruptions,  while at the same time increased COVID-19 vaccinations allowed consumers to shift some spending from goods to activities like going out to dinner and traveling despite the delta variant, the National Retail Federation said on August 17.

“July retail sales showed a slight deceleration in spending, but nothing to derail our outlook for a record year,” NRF CEO Matthew Shay said. “Though the delta variant is presenting health challenges while supply chain disruptions along with unfilled job openings are presenting business challenges, the consumer and broader economy continue to display steady strength aided by advanced tax credit payments and strong gains in the labor market and personal incomes. We remain optimistic that the strength of the American consumer and ingenuity of the retail industry will produce continued growth heading into the fall. We encourage people to get vaccinated as soon as possible to stop the spread of the virus and to keep our economy growing.”

Despite this decrease, NRF Chief Economist Jack Kleinhenz said the rebound is strong.  “The consumer has continued to be resilient and recent price increases brought on by constraints in the supply chain have not dampened the robust demand seen during the past year. If retailers could find more inventory, they could sell it," Kleinhenz said. 

"Going forward, consumers are a bit fearful again as we approach another possible wave of COVID-19 infections, but they’ve learned to live with the virus and shopping continues," he added. "The delta variant could impact local markets, especially where vaccination rates are low, but doesn’t appear likely to show up in the national data.”

The shift to spending on services was expected as more of the economy reopened, and this year’s move of the Amazon Prime Day promotion to June may have siphoned off some sales that normally come in July. But Kleinhenz said consumer finances are in good shape with a cushion from paying off debt and building up savings. Employment and wages have seen recent back-to-back increases, and advance child tax credit payments going out for the second month in a row should provide a bump for spending.

Solid back-to-school spending contributed to July’s results and is expected to spill over into August as well. The U.S. Census Bureau said on August 16 that overall retail sales in July were down 1.1% seasonally adjusted from June but up 15.8% year-over-year. That compares with an increase of 0.7% month-over-month and an increase of 18.7% year-over-year in June.

Despite occasional month-over-month declines, sales have grown year-over-year every month since June 2020, according to Census data. NRF’s calculation of retail sales – which excludes automobile dealers, gasoline stations and restaurants to focus on core retail – also showed July was down 1.1% seasonally adjusted from June but showed that the month was up 9.5% unadjusted year-over-year. That compared with a month-over-month increase of 1.1% and a year-over-year increase of 12.8% in June. NRF’s numbers were up 13% unadjusted year-over-year on a three-month moving average.

For the first seven months of the year, sales, as calculated by NRF, were up 15.5% over the same period in 2020. That is consistent with NRF’s revised forecast that 2021 retail sales should grow between 10.5 % and 13.5% over 2020 to between $4.44 trillion and $4.56 trillion.

July sales were down in all but two categories on a monthly basis but up across the board year-over-year, led by increases at clothing, electronics and furniture stores. Specifics from key sectors include:

• Clothing and clothing accessory stores were down 2.6% month-over-month but up 45.8% year-over-year.
• Electronics and appliance stores were up 0.3 % month-over-month and up 23.4% year-over-year.
• Furniture and home furnishings stores were down 0.6% month-over-month but up 15.6% year-over-year.
• Sporting goods stores were down 1.9% month-over-month but up 14.5% year-over-year.
• General merchandise stores were down 0.1% month-over-month but up 12.4% year-over-year.
• Health and personal care stores were up 0.1% month-over-month and up 8.4% year-over-year.
• Building materials and garden supply stores were down 1.2% month-over-month but up 5.3%  year-over-year.
• Online and other non-store sales were down 3.1%month-over-month  but up 3.7 % year-over-year.
• Grocery and beverage stores were down 0.7% month-over-month but up 2.9% year-over-year.