Trade War Uncertainty and Threats of Higher Prices Cloud Consumer Confidence

The National Retail Federation released its latest retail sales report last week, reporting strong growth in both sales volume and consumer confidence while simultaneously warning that the threat of higher prices and uncertainty caused by looming tariffs may come with consequences that have yet to be seen.

Retail sales in July, excluding auto dealers, gas stations and restaurants, were up 0.9% seasonally adjusted from June, according to the NRF, and were up 5.6% when compared year-over-year.

“July’s strong results are consistent with a confident consumer,” NRF chief economist Jack Kleinhenz said in a statement. “Households are in good shape with spending and that should continue as long as the labor market remains healthy.”

However, the same was not true for apparel retail sales, which fell by 1.6% year-over-year, though sales were up 0.8% when seasonally adjusted month-to-month. The struggles dominating the apparel retailer sector loom large just weeks before the impending Sept. 1 implementation of a 10% tariff on select Chinese goods.

Although the Trump administration has since said it would be postponing tariffs on certain goods until December to limit their effect on the critical holiday shopping, most apparel and footwear goods will still be on the list next month — a fact that was not lost on Kleinhenz.

Acknowledging President Trump’s unpredictable flip-flopping on tariffs, Kleinhenz said, “It’s important to remember that today’s data is looking backward at what was happening a month ago. The impact of volatile financial markets and increased trade tensions in recent weeks may put a wind of caution in consumer spending as we move forward in 2019.”

Apparel prices have already begun to tick up under the mere threat of rising duties, growing for both menswear and women’s clothing over the past two months. In July, apparel prices rose by 0.4% with some categories, like men’s suits, sport coats and outerwear, increasing by nearly 5% in average sale price.

Still, for many retailers, the NRF’s numbers offer hope that trade war fears will not weigh too heavily on revenue and earnings over the next quarter, a sentiment echoed by Walmart in its most recent financial report. The three-month moving average for retail sales growth is up 3.5% over the comparable period a year ago and, as of yet, show no signs of slowing down.

Additionally, the NRF’s report shows that Amazon’s highly-successful Prime Day showing may have had a decidedly macro impact on e-commerce sales in July, lifting online and non-store sales by 19.3% year-over-year and up 2.8% on a month-to-month basis.

Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit

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