The Delta variant and supply chain issues are having an impact on consumer activity.
Retail sales were $617.7 billion in July, marking a decline of 1.1% since June, according to a monthly report from the US Census Bureau. (Sales were up 15.8% compared to July 2020.) Sales were lower than estimates of a 0.3% decline expected from Dow Jones.
Clothing and accessories sales were up 43.4% from July 2020, with food services and drinking up 38.4%.
In June, consumer spending rose month over month, suggesting that consumers were ready to became less hesitant about spending as the pandemic eased up. The dip in July suggests an impact from the Delta variant as well as shipping and supply chain disruptions across the industry.
To deal with the spread of the variant, some stores have revisited their mask policies and recommendations for customers and employees. Target now requires its employees to wear masks and recommends that customer wear them. Walmart recommends customers wear them as well.
Port congestion and shipping disruptions have also been major headaches for brands and retailers this quarter. Freight rates have reached record highs amid pandemic-related shipping slowdowns, factory and store shutdowns, clogged ports and worker shortages. As a result, prices on certain items have increased.
According to the Bureau of Labor Statistics’ monthly report, consumer prices rose by 5.4% in July versus a year ago. Footwear prices still showed significant increases, but at a slightly slower pace than a month ago.
According to a monthly Global Port Tracker report released by the National Retail Federation and Hackett Associates, imports at the country’s largest retail container ports will hit record-highs in August.
Despite the headwinds, the National Retail Federation is optimistic on the outlook for future industry recovery.
“July retail sales showed slight deceleration in spending, but nothing to derail our outlook for a record year,” NRF president and CEO Matthew Shay said in a statement. “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.”