Why US Retail Sales Increased More Than Expected in June

American shoppers ramped up their spending in June for the fourth month in a row — a solid finish to the quarter for U.S. retailers.

According to the Commerce Department, retail sales rose 0.4% last month, although economists forecasted an increase of just 0.1%. It’s a good sign for the economy, which faced turbulent times in the first few months of the year amid the protracted U.S.-China trade war, weaker business investments and a global manufacturing slump.

The higher than expected gain also came on the heels of a strong April and May, when sales growth also logged in at 0.4%. Among the sector’s biggest gains were clothing and clothing accessories stores, which grew 0.5%, as well as general merchandise stores, climbing 0.2%, and non-store retailers, with a 1.7% advance. (Department stores, on the other hand, slid 1.1%.)

Rising wages and low unemployment appear to be driving the boost. Last month, American employers added a robust 224,000 jobs, easing worries of a weakening labor market after May’s disappointing 75,000 new jobs. The unemployment rate edged slightly higher at 3.7% — still close to a 50-year low — while average hourly earnings climbed 3.1% from a year earlier and the labor force participation rate remained steady at 62.9%.

Despite the positive growth, global research firm Coresight Research still predicts a rise in the number of store closures this year ahead of the back-to-school and holiday shopping seasons. The firm reported that retailers across the U.S. have announced 7,062 store closures so far in 2019 — already exceeding the 5,864 closures for all of 2018. This year’s tally, it said, could top 12,000 by December, which would set a new record for the industry.

An ongoing decline in brick-and-mortar traffic has followed a consumer shift to digital shopping — led by e-commerce giants like Amazon — as well as a rise in spending on experiences like travel and dining. Retailers are also changing the face of the traditional mall (think New York City’s Hudson Yards and the soon-to-open American Dream in New Jersey), with experiential and personalized offerings among the ways to connect with today’s shoppers.

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