Retail sales inched up 1.2 percent in July as Americans loaded up on electronics

Families preparing for a virtual school year powered sales of laptops, webcams, headphones and other electronics by 23 percent

Sales of big-ticket items like cars fell in July, as cash-strapped Americans pulled back on many categories of spending.
Sales of big-ticket items like cars fell in July, as cash-strapped Americans pulled back on many categories of spending. (David Zalubowski/AP)
August 14, 2020

Retail sales grew a disappointing 1.2 percent in July, following two months of sharp gains, raising worries about a renewed wave of economic pain as enhanced unemployment benefits expire for millions of Americans.

Consumers pulled back on big-ticket items like cars, building materials and sporting goods in July, but spent more on food, gasoline, and health and beauty products, according to numbers released Friday by the U.S. Commerce Department. Spending increases were generally modest, with one exception: Electronics and appliance stores saw a 23 percent increase from June as families stocked up on laptops, headphones and webcams to prepare for a virtual start to the school year in many parts of the country.

“Gains were extremely uneven,” Diane Swonk, chief economist at Grant Thornton, wrote in a note to clients. “Retail sales showed signs of slowing in July, which underscores our concern that the rebound is losing momentum.”

Overall consumer spending inched up to $536 billion, from $529.4 billion in June.

The uptick follows two months of surprise growth — retail sales surged a record 18.2. percent in May, and 8.4 percent in June — after steep drop-offs the previous two months. Retail sales fell 8.3 percent in March and 14.7 percent in April.

The pandemic has plunged the nation into the worst economic crisis since the Great Depression. And though there are signs that the wealthy have recovered, economists say it probably will take years for the rebound to reach most Americans. More than 30 million people are collecting unemployment benefits, with Black and Hispanic families among those who have been hardest hit by the crisis.

A federal boost to unemployment benefits, which provided an additional $600 a week to jobless Americans, expired at the end of July, leaving millions of households struggling to make ends meet. Lawmakers have yet to agree on what the next stimulus package would include, or when it might take effect. Meanwhile, more than 100,000 small businesses have already permanently closed, and many others have furloughed or laid off huge swaths of their workforce.

“While households are spending, they are anxious about their health and economic well-being, so they are being pragmatic,” said Jack Kleinhenz, chief economist for the National Retail Federation, an industry trade group. “We have to remember that there’s uncertainty about economic policy and that the resurgence of the virus is putting pressure on the fledgling recovery.”

More than 5.2 million novel coronavirus cases have been recorded since the pandemic began in the United States. More than 164,000 Americans have died, including nearly 1,500 deaths recorded Wednesday — the largest single-day count since mid-May.

Analysts say consumer spending patterns have shifted during the pandemic, as more shoppers buy online and rethink their purchases of discretionary goods like apparel, handbags and jewelry. At least a dozen major retailers — most of them mall-based chains or department stores — have filed for bankruptcy since April. Grocery stores, meanwhile, are doing brisk business as Americans increasingly do their dining at home.

Apparel retailers, which typically get a big boost from the back-to-school surge, have seen demand drop in many parts of the country, as parents hold off on buying new clothes and shoes for their children.

“Where shoppers elected to spend their money remains very uneven,” said Neil Saunders, managing director of GlobalData Retail. “While online apparel is performing very well, visits to clothing shops, especially those located in malls, are extremely suppressed. Impulse buys are down and spending on certain categories, like workwear, has all but been wiped out.”

Vehicle sales, which surged earlier in the summer as Americans bought used cars, dipped 1.2 percent in July. Furniture sales remained flat from June, while spending at building materials and garden stores fell 2.9 percent and dropped 5 percent at sporting goods and hobby stores.

The coming months will be crucial for retailers, analysts say, as they try to make up lost ground during the back-to-school and holiday shopping seasons, which are typically the two largest sales periods of the year.

“A lot is up in the air right now — is school going to be virtual, is it physical, is it a hybrid of the two?” said Marie Driscoll, a managing director at Coresight Research, a retail advisory firm that is predicting that back-to-school sales will slump by as much as 11 percent this year. “Not knowing the answers to those questions makes it hard for both consumers and retailers.”

The Washington Post