As Retail Sales Miss Expectations, Is a Summer Slowdown in Sight?

June’s retail sales report missed expectations — and it may be the case that tepid consumer spending, while still increasing, may wind up causing a buildup of inventory on merchants’ shelves.

Data from the Census Bureau released Tuesday (July 18) show that during the month, retail sales were up 0.2% from May, missing the consensus of 0.5% gains, and down from the May revised 0.5% increase. That May reading was up from a previous estimate of a 0.3% increase.

And so the question must be asked: Is the June data a bit of a blip — a slightly tepid reading that represents an aberration? Or is it a sign of things to come?

The tables that accompanied the headline number show that there was some resilience in categories as varied as electronics and appliance stores, where sales were up 1.1%. Spending at furniture stores was up 1.4%.

Several Categories Decline

But several categories slowed, or showed outright declines. Importantly sales at department stores slipped 2.4%, after logging a 0.2% increase in May. Those declines, we note, may be a harbinger of inventory builds at brick-and-mortar locations. Spending at healthcare and personal stores was down 0.1%, where that segment had been up 0.2% in May, as measured month over month. Sporting goods and other leisure items, purchased at hobby stores and other outlets, lost 1%, quickening a 0.1% decline seen in May.

In JPMorgan’s earnings commentary last week, CEO Jamie Dimon noted that “Consumer balance sheets remain healthy,” and stated that “consumers are spending, albeit a little more slowly.” Consumers are also “slowly using up their cash buffers” as they grapple with inflation. JPMorgan’s results showed that credit card volumes were up 8.5% from a year ago, though slowing from double-digit rates seen earlier in the year.

Citigroup, for its part, notched gains in card-related spending, too, as U.S. card spend volumes were up 3% year on year to $152 billion.

Triangulating some data points to be found elsewhere also give some tailwind to the argument that the slowdown may have legs.  As we reported here at the end of last month, the U.S. Conference Board’s Consumer Confidence Index’s  reading rose from 102.5 to 109.7 in June over May’s level — the highest level since the beginning of last year.  But the latest 79.3 reading is below the 80 point level, and tends to point toward recession. The economic outlook — as measured by the St. Louis Fed, which projects out over 12 months — was 50 in May, down from 60 in April, and down from 61 at the end of last year. Expectations, of course, inform future spending, and the slowdown that’s in evidence now may become a longer-term trend, and may give businesses dependent on keeping inventory moving a bit of a challenge.

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