Retail Sales Fell 1.1% in July while May and June Sales Revised Higher

Retail Sales Fell 1.1% in July After May and June Sales were Revised Higher, R.J.S, MarketWatch 666

Seasonally adjusted retail sales were 1.1% lower in July after retail sales for May and June were revised higher . . . the Advance Retail Sales Report for July (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $617.7 billion during the month, which was 1.1 percent (± 0.5 percent) less than June’s revised sales of $624.7 billion but was 15.8 percent (±0.7 percent) above the adjusted sales in July of last year…June’s seasonally adjusted sales were revised 0.5% higher, from the $621.3 billion reported last month to $624.7 billion, while May sales were revised 0.4% higher, from $617.9 billion to $620.1 billion, and as a result the June increase was revised from 0.6% to 0.7% . . . estimated unadjusted sales, extrapolated from a survey of a small sampling of retailers, indicated sales actually rose 0.4%, from $634,630 million in June to $636,980 million in July, while they were up 15.9% from the $549,416 million of sales in July a year ago . . . combined, the revisions to May and June indicate that the 2nd quarter’s adjusted sales were roughly $5.6 billion higher than was previously reported, which would add about $22.5 billion to the BEA’s annual rate calculation of 2nd quarter personal consumption expenditures before the inflation adjustment, which should be enough to boost 2nd quarter GDP by roughly 0.23 percentage points when the 2nd estimate is published at the end of the month…

Included below we have the table of the monthly and yearly percentage changes in retail sales by business type taken from the July Census pdf . . . the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from June to July in the first sub-column, and then the year over year percentage change for those businesses since last July in the 2nd column; the second pair of columns gives us the revision of last month’s June advance monthly estimates (now called “preliminary”) as revised in this report, likewise for each business type, with the May to June change under “May 2021 (r)evised” and the revised June 2020 to June 2021 percentage change in the last column shown . . . should you want to check which sales metrics were most revised, our copy of the table of last month’s advance June sale estimates, before this month’s revision, is here….

To compute July’s real personal consumption of goods data for national accounts from this July retail sales report, the BEA will use the corresponding price changes from the July consumer price index, which we reviewed last week . . . to estimate what they will find, we’ll first pull out the usually volatile sales of gasoline from the other totals…from the third line on the above table, we can see that July retail sales excluding the 2.4% price related increase in sales at gas stations were down by 1.4% . . . then, subtracting the figures representing the 0.7% decrease in grocery & beverage sales and the 1.7% increase in food services sales from that total, we find that core retail sales were down by more than 2.0% over the month . . . since the July CPI report showed that the the composite price index of all goods less food and energy goods was 0.5% higher in July, we can thus figure that real retail sales excluding food and energy, or real core PCE, will show a decrease of about 2.5% for the month . . . however, the actual adjustment in national accounts for each of the types of sales shown above will vary by the change in the related price index . . . or instance, while nominal sales at motor vehicle & parts dealers were down 3.9%, the July price index for transportation commodities other than fuel was 1.0% higher, which would suggest that real sales at auto & parts dealers almost 4.9% lower, once price increases are taken into account . . . similarly, while nominal sales at sporting goods, music and book stores were 1.9% lower in July, the recreational commodity price index was 0.5% higher, which would mean that real sales of those types of goods fell around 2.4%…

In addition to figuring those core retail sales, to make a complete estimate of July’s real PCE, we’ll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do…the July CPI report showed that the food price index was 0.7% higher, as the price index for food purchased for use at home rose 0.7% while the index for food bought away from home was 0.8% higher . . . thus, while nominal sales at food and beverage stores were 0.7% lower, real sales of food and beverages would have been around 1.4% lower in light of the concurrent 0.7% increase in prices . . . t the same time, the 1.7% increase in nominal sales at bars and restaurants, once adjusted for 0.8% higher prices, suggests that real sales at bars and restaurants actually rose around 0.9% during the month . . . meanwhile, while sales at gas stations were up 2.4%, there was concurrently a 2.4% increase in the price of gasoline during the month, which would suggest that real sales of gasoline were close to unchanged for the month, with a caveat that gasoline stations sell more than gasoline, and we haven’t accounted for those other sales…by reweighing and averaging the real sales changes that we have thus estimated back together, and excluding food services, we can then estimate that the income and outlays report for July will show that real personal consumption of goods fell by around 1.8% in July, after rising by a revised 0.3% in June, but after falling by a revised 2.4% in May, and after falling by 0.4% in April, but after rising by 10.0% in March, falling by 3.3% in February and rising by 7.2% in January…at the same time, the 0.9% increase in real sales at bars and restaurants would have a positive impact of less than 0.1% on July’s real personal consumption of services . . .