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Despite the modest 0.2% gain in overall sales in June, core categories like e-commerce are still running strong. E-commerce sales grew 2.0% in June, pushed along by the Amazon Prime Day sale that many retailers participated in. This was the sixth consecutive month that e-commerce sales have risen by 1.0% or more. E-commerce now accounts for 29% of retail sales excluding motor vehicles and gasoline.
Speaking of cars, motor vehicle sales rose strongly for the second month, up 1.9%, while sporting goods sales rose 1.3%, the third month in a row of solid gains. Electronics and appliances sales also showed strength, up 0.8%. The modest overall gain in June was due to gasoline sales dropping, as prices came down during the brief U.S.-Iran ceasefire. Gas prices are rising again in July, though. Other retail categories saw little change in sales. Furniture and miscellaneous sales took a pause after strong growth the previous month. Grocery, health and personal care, and building materials sales have seen only modest growth for much of the year. Restaurant sales paused after two strong months in April and May. Spending on services excluding dining grew a strong 0.7% in May, after rising by 0.3% in April. Financial services jumped 1.6%. (May is the latest month for which services spending data other than dining are available. June data will be available on July 30.)
Rising gasoline prices so far in July may be a drag on other retail sales. High gasoline prices may eventually cause consumer spending to slow down a bit, simply because savings rates are low and households will need to rebuild their bank accounts by curbing their discretionary spending. Pricey gasoline and airfares (due to high jet fuel costs) may also be a drag on travel and recreation spending this summer.
Consumers have so far kept spending briskly amid rising gasoline costs and the accompanying decline in inflation-adjusted personal income by dipping into their savings. The personal savings rate was just 3.0% in May, down from an average of 4.6% last year. Look for the rate to rise towards 4.0% by the end of the year. That translates to about $240 billion less consumer spending, equal to 0.8% of GDP. However, if the stock market continues to do well this year, then investment gains could supplement savings among affluent households, enabling the low savings rate to continue for a while.
