Retail Sales: Modest Rebound, Trend Decelerating

Bottom Line:   Retail sales rose more than expected in June,  better than expected, even adjusted for negative revisions to May data.   Online retailers, the largest core component, rebounded but also saw the largest negative revisions to May data.   Eating and drinking places (restaurants and bars) saw continued but modest gains amid more reopenings. But the trend is decelerating in the sector, somewhat surprisingly earlier than expected (potentially due to the increase in Covid infections).   One of the hardest hit in 2020, clothing stores also saw modestly stronger sales for the second month in a row. There are signs of substitution away from goods towards services as reopenings continued.  Slower building and garden store sales, for instance, suggest people are spending less on their homes after a year of massive home-focused spending.  Moreover, we should note that retail sales don't capture spending on many services like air travel and hotels.   Overall, the trend in retail sales is decelerating, somewhat slower than the expectations for the "reopening", particularly in the restaurant sector. Finally, sales in the auto and parts sector (the largest segment at $132B) slowed for the second month in a row, potentially supporting the notion that the sharp increase in used car prices may still prove transitory.Retail Sales ROSE by 0.6% in June,  compared with the market consensus for a decrease of 0.3%. The May estimate was revised lower from -1.35% to -1.72%. Retail sales are now 18.0% ABOVE their year-ago level; just a year ago, the year over year growth rate was 2.1%. Spending at motor vehicle dealers fell by 2.0%.
             
Core Retail Sales ROSE by 1.3%, compared with the market consensus for an increase 0.4%. The May estimate was revised lower from -0.66% to -0.88%. Core retail sales are now 17.6% ABOVE their year ago level; just a year ago, the year over year growth rate was 0.8%.In June, gains at general merchandise stores (+1.9%), gasoline stations, primarily due to high gasoline prices (+2.5%), nonstore retailers (+1.2%), clothing stores (+2.6%). were partially offset by declines in building materials (-1.6%), furniture & home furnishing (-3.6%), and sporting goods, hobbies, etc. (-1.7%),
 
Core Retail Sales ex Gasoline ROSE by 1.15% and are now 15.8% ABOVE their year ago level; just a year ago, the year over year growth rate was a moderate 3.1% .