June Retail Sales

Retail sales continued its string of losses in June according to the Census Bureau.  The monthly change fell 0.5 percent and follows declines of 0.2 percent in both April and May.  While this measure of the economy only reveals the purchases of retail goods and does not consider money spent on services, it is still suggesting the economy has become sluggish.  Unless Americans make up the difference by spending more money in the service economy, like getting more frequent haircuts, the likelihood of recession is increasing.

Consumption was down in several categories.  Motor vehicle sales fell as did gasoline revenues. Since the Census Bureau does not adjust for price moves, even if Americans purchased the same volume of gasoline, the petrol sales figure would decline during times that gas prices are declining.  The Bureau includes a column that excludes auto sales and gas, and it shows the rest of retail sales fell 0.2 percent in aggregate.  There were a few categories showing monthly improvements, but miscellaneous retailers, non-store retailers combined with clothing & accessories and food & beverage stores did not improve enough to counter the other areas of June’s retail weakness.

Retail sales are a large portion of our economy so the recent weakness is concerning.  The U.S. was already in a recession the last time this indicator contracted for three consecutive months.  The consumer is the largest driver of the economy, and this report illustrates fatigue is setting in.  This does not mean Americans cannot get a second wind, but if consumers do not get a boost of spending energy, our economy will need more purchases to come from our foreign trade partners on other continents. With any luck, their weakness (Europe and Asia) will not get in the way of their consumption of U.S. goods.  Of course, the Federal Government may try to borrow more to spend as well, but that can only happen after the “fiscal cliff” is addressed.    (by C. Cox)