June retail sales should be strong from a pickup in spending before new virus outbreak slowed activity

A shopper walks with bags of purchases in New York.

John Lamparski | SOPA Images | Getty Images

Retail sales in June are expected to have gained 5.2% as the economy reopened, but sales could have trailed off towards  the end of the month as the virus outbreak worsened.

According to Dow Jones, economists expect sales rose 5% when excluding vehicle sales. May sales jumped by a surprising 17.4%, and 17.2% excluding automobiles, as states first reopened their economies.

 “They’re backward looking, and I’m afraid we might get a decline in July,” said Diane Swonk, chief economist at Grant Thornton. She expects sales increased by 5.5%, and the number would have been stronger were it not for a slowdown by consumers who stayed home in the second half of the month.

“That was before states went into reversing lock downs. Foot traffic in malls declined,” she said. Some states have moved to once more restrict indoor dining, bars and movie theaters, after opening up several weeks ago.

Mark Zandi, chief economist at Moody’s Analytics, said he expects sales increased by 6%, and he said business spending data collected by software firm Cortera confirms that it was strong. Cortera analyzes business to business spending, and it is a barometer for spending activity by consumers.

 “The strongest categories were a big increase in clothing stores, furniture, electronics and appliance stores and sporting goods stores,” he said.

However, he said in hot-spot states, spending clearly slowed toward the end of the month, as there were fewer restaurant bookings.

The retail sales number is important because it shows how the consumer is faring, but now it’s also important to see where the activity is because so many millions of Americans in the services sector are out of work. “Retail sales don’t include all the services. It’s just a piece of the pie. A much larger part is travel and tourism,” she said.

Zandi said the pickup in retail sales in May and June has been  encouraging even if there was a likely tapering off. For June, on a seasonally adjusted basis, he expects retail sales would total $515 billion, virtually flat with last June’s $519 billion.

“Given where we were two months ago, this feels like a miracle,” he said. “This is a little backward looking, so I wouldn’t count on retail sales getting back to where we were in July and August.”

He said the burst of business after states first reopened clearly showed up in the economic data. “By the first weeks of June, everything felt really good, including the jobs number. In the second half of June, first half of July, things have gone flat, and have flatlined for the last five or six weeks,” he said.

The course of the economy will depend on the course of the virus, and how long activities will be shut down or how long Americans will simply avoid them. There were more than 60,000 new cases reported Wednesday.

Source Article