Startup Observer.com
  • Home
  • Industries
  • Innovation
  • outsourcing
  • Business
  • Finance
  • Headlines
  • Opinion
  • News
Home Business Automobile shortages, spending shift to services hurt U.S. retail sales
Business

Automobile shortages, spending shift to services hurt U.S. retail sales

by jcp August 17, 2021
August 17, 2021
gawdo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales fell more than expected in July as shortages depressed motor vehicle purchases and the boost to spending from the economy’s reopening and stimulus checks faded, suggesting a slowdown in economic growth early in the third quarter.

The weak sales reported by the Commerce Department on Tuesday also reflected a rotation in spending back to services from goods. Retail sales mostly capture the goods component of consumer spending, which accounts for a smaller share, with bulky services such as healthcare travel and hotel accommodation making up the rest.

The school year gets into full swing later in August and most education districts are reverting to in-person learning. As such, consumer spending is likely to remain strong and keep the economy growing, though rising COVID-19 cases and a recent plunge in consumer sentiment are wild cards.

“If anything, today’s data suggests that spending is not keeping pace at the start of the third quarter after the fiscal stimulus-fueled and re-opening led surge in consumption growth in second quarter,” said Kevin Cummins, chief U.S. economist at NatWest Markets in Stamford, Connecticut.

“We still expect sales to bounce back for the quarter as a whole. Spending will benefit from recent strength in job gains and a boost from back-to-school spending as kids begin to return to in-school classrooms.”

Retail sales dropped 1.1% last month. Data for June was revised up to show retail sales increasing 0.7% instead of rising 0.6% as previously reported. Retail sales are 17.2% above their pre-pandemic level.

Economists polled by Reuters had forecast retail sales slipping 0.3%. Sales increased 15.8% compared to July last year.

Receipts at auto dealerships fell 3.9% after declining 2.2% in June. Motor vehicle production has been hampered by a global shortage of semiconductors.

There was some encouraging news, with a separate report from the Federal Reserve on Tuesday showing motor vehicle output surged 11.2% in July as auto makers either pared or canceled annual retooling shutdowns to work around the chip shortage. That boosted manufacturing production last month.

Online retail sales dropped 3.1%, payback after Amazon.com pulled forward its Prime Day to June from July. Sales at clothing stores fell 2.6%. A rebound is expected as parents shop for the new school year. Qualifying households in mid-July started receiving money under the expanded Child Tax Credit program, which will run through December.

Sales at building material stores decreased 1.2%. Receipts at sporting goods, hobby, musical instrument and book stores declined 1.9%.

But consumers increased spending at restaurants and bars, leading to a 1.7% rise in receipts. Sales at restaurants and bars increased 38.4% compared to July 2020. Restaurants and bars are the only services category in the retail sales report.

Sales at electronics and appliance stores gained 0.3%.

Stocks on Wall Street fell on the retail sales data and a weak earnings report from Home Depot. The dollar rose against a basket of currencies. U.S. Treasury prices were higher.

SPENDING ROTATION

Excluding automobiles, gasoline, building materials and food services, retail sales fell 1.0% last month after an upwardly revised 1.4% increase in June. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously estimated to have accelerated 1.1% in June.

Part of the cooling in retail sales reflects the shift in spending from goods to services like travel and entertainment, with more than 50% of the United States’ population fully vaccinated against COVID-19.

Rising infections driven by the Delta variant of the coronavirus could, however, slow the services spending boom.

The U.S. Centers for Disease Control and Prevention in late July urged fully vaccinated Americans to resume wearing masks in indoor public places in areas where the virus is surging.

“We’ve long held the view that discretionary services would lift overall consumer spending this year as the economy trended back to some semblance of normal,” said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina.

“But now with the resurgence of COVID, those gains may be more tepid. High-frequency data on restaurant visits and travel have plateaued in August as the Delta variant has become more prevalent in the United States.”

Still, the foundation for consumer spending growth remains strong. Job growth is picking up and employers are raising wages. Households are sitting on at least $2.5 trillion in excess savings accumulated during the pandemic.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, notched double-digit growth in the second quarter, helping to pull the level of GDP above its peak in the fourth quarter of 2019.

The economy grew at a 6.5% annualized rate in the second quarter. The Atlanta Federal Reserve is currently estimating GDP growth will increase at a 6.0% pace in the third quarter.

“The economy has strong positive momentum that should carry into 2022,” said Ben Ayers, a senior economist at Nationwide in Columbus, Ohio. “A slower pace of consumer spending in the months ahead could act to dampen overall growth, but likely only modestly so.”

 

(Reporting by Lucia Mutikani; Editing by Nick Zieminski and Andrea Ricci)

 

www.gawdo.com
Share on FacebookShare on TwitterShare on Linkedin
0 FacebookTwitterPinterestEmail
previous post
Oil eases as weak Asian data, more lockdowns dampen demand hopes
next post
British Home Secretary calls on other nations to help take in Afghan refugees

You may also like

How to streamline logistics costs 

August 11, 2022

Ciphr appoints David Burns as chief technology officer

August 2, 2022

Pipedrive welcomes its 1000th employee to accelerate the...

August 1, 2022
Editorial & Advertiser disclosureEditorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.
gawdo.com
https://www.gawdo.com
  • About us
  • Advertising & Terms of Use
  • Contact Us
  • Privacy Policy

@2021 - All Right Reserved.


Back To Top
Startup Observer.com
  • Home
  • Industries
  • Innovation
  • outsourcing
  • Business
  • Finance
  • Headlines
  • Opinion
  • News
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
Cookie SettingsAccept All
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT