U.S. retail sales increased unexpectedly in June as the lifting of pandemic-related restrictions encouraged Americans to spend heavily at bars and restaurants.

The Commerce Department reported that retail sales rose 0.6% last month after declining 1.7% in May. Economists had expected a 0.4% drop in June.

Sales rebounded even though purchases of motor vehicles declined for a second straight month amid a global semiconductor shortage that has slowed production. Consumers increased spending at restaurants and bars, leading to a 2.3% rise in receipts, and at clothing stores, which posted a 2.6% gain.

“Inflation is a challenge for businesses right now, but sales growth is very good, and consumer demand is very good,” Bill Adams, senior economist at PNC Financial Services Group, told The Wall Street Journal. “We’re in the middle of a very strong recovery,” he said.

Households are flush with cash in part because they accumulated at least $2.5 trillion in excess savings during the pandemic. Starting this month through December, some families will receive expanded child tax credits, which, according to Reuters, should help middle- and lower-income households to maintain spending.

“Lack of available cash or credit to spend is as small a restraint on spending as it ever is. Combined with massive forced saving, wealth is likely higher than it would have been without the pandemic,” Scott Hoyt, senior economist at Moody’s Analytics, said.

During the pandemic, consumer demand shifted to goods like electronics and motor vehicles as millions of people worked from home, took online classes, and avoided public transportation.

The June retail sales report suggests the recovery is now boosting services such as dining out and items related to outside activities. Sales at restaurants and bars increased 40.2% compared with June 2020.

Auto sales fell by 2% and weighed on overall retail sales last month. Excluding autos, sales rose 1.3% in the same period.

Despite the May slump, Reuters said, economists still believe that consumer spending, which accounts for more than two-thirds of U.S. economic activity, posted double-digit growth in the second quarter. Consumer spending grew at an 11.4% annualized rate in the first quarter.

Photo by Justin Sullivan/Getty Images

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