Retail Sales Down in July, According to Department of Commerce Report

The Commerce Department recently reported that spending at U.S. retailers fell 1.1 percent in July, amidst the rise of COVID-19 cases linked to the Delta variant as well as a decrease in purchases of goods and consumer demands. The survey suggested that Americans shifted spending more toward services during the month.

The Wall Street Journal highlighted that sales fell in several categories, most significantly autos, which declined 3.9 percent. Spending on clothing, sporting goods, and furniture also fell, largely due to supply-chain issues and limited inventory.

Retailers are facing uncertainty due to the Delta variant, which also led to pullback in spending areas like air travel and cruises. Richard Curtin, chief economist for a University of Michigan survey showing an early August drop in consumer sentiment, said that the decline was due to “dashed hopes that the pandemic would soon end.”

On the other hand, spending in restaurants and bars rose 1.7 percent in July. Manufacturing output also increased 1.4 percent, largely driven by an 11.2 percent rise in auto parts production. Although retail spending fell, sales remained above pre-pandemic levels, with sales in July 17.5 higher than in February 2020.

“The amount of anxiety that’s occurred since probably February of 2020, this is mild relative to that,” said Peter Elitzer, chief executive at discount retailer Label Shopper.

The report’s spending trends represent “passion-led spending,” where consumers restart their pre-pandemic activities. Bricklin Dwyer, chief economist at Mastercard, said that people are spending money on items they “feel good about because you’ve had a lot of time to think on what you want to do when the economy reopens.”