Retail Sales Were Strong in June, but Department Stores Struggled

Retail sales kept up their solid run in June, rising 0.5 percent, according to the Commerce Department.

Rising wages and a strong labor market buoyed consumer spending in the second quarter after a sluggish start to the year. Retail sales in the period were up 1.9 percent from the first quarter and surged 5.9 percent from the same period in 2017.

May’s retail numbers, meanwhile, were revised upward to 1.3 percent, from a previously reported 0.8 percent.

Core retail sales — a figure that excludes automobiles, gasoline, building materials and food services — were unchanged in June, however, after increasing 0.8 percent in May, suggesting that the overall growth last month was aided in part by higher gas prices and rising vehicle sales.

Sales at clothing and accessory stores dropped 2.5 percent in June but rose 4.6 percent year over year, seasonally adjusted. Department store sales likewise fell 1.8 percent month over month, the largest dip in more than two years, putting sales approximately on par with 2017.

As expected, consumers continued to take more of their dollars online as e-commerce and other nonstore sales rose 1.3 percent in June and 7.3 percent year over year.

“This is a healthy retail sales report and consistent with underlying economic momentum that has fueled a steady run of retail sales increases,” said Jack Kleinhenz, chief economist at the National Retail Federation. “The big question is whether households can continue this spending pace, which is helping drive the current economic cycle. We think they can, but the big risk to the outlook is the trade war, which could raise prices while reducing consumer confidence and household buying power.”

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