NAFCU: Rising Retail Sales Shows Economy’s Resilience
NAFCU Chief Economist Curt Long said the Census Bureau’s retail sales report released on Thursday shows signs that the increase in COVID-19 cases is starting to affect parts of the economy, but that overall consumer spending is proving to be resilient.
The Census Bureau reported that Americans spent seasonally-adjusted $ 619 billion in August at retailers, including restaurants and bars. This amount was 0.7% higher than in July and followed a 1.8% drop from June to July.
But excluding autos and parts, retail sales rose 1.8% to $ 497 billion in August after falling 1% in July.
“Retail sales rose sharply in August even as auto sales continue to decline,” Long said. “Growth was driven by non-store retailers and general merchandise, two sectors that experienced significant declines in July.
CO-OP Financial Services, the CUSO payments company based in Rancho Cucamonga, Calif., Also reported on Wednesday an apparent increase in retail spending from July to August among its base of credit union members.
The census said restaurant and bar sales were flat at $ 72 billion in August after rising 1.3% in July. In contrast, grocery store sales rose 2.1% to $ 68 billion in August after declining 0.4% in July.
“Restaurant sales remain stable while grocery store sales increase, so the spread of the Delta variant is having an effect on normalizing spending patterns for now,” Long said. Consumers have also bought so many goods in the past 18 months of activity restrictions that the demand for goods in certain categories is being spent. “
However, Long said that a bigger problem is that the shortage of new cars continues to push auto sales down. Sales of cars and parts accounted for 20% of sales and fell 3.6% to $ 121 billion in August after falling 4.6% in July.
The good news is that despite the growth of COVID cases over the summer, the reduction in fiscal stimulus and the rotation from consumption of goods to consumption of services, sales levels remain well above of their pre-COVID trend.
“This momentum will be important going forward as reports suggest shipping delays could impact the holiday shopping season. We might see some volatility coming, but consumer confidence is strong and should be sufficient to keep growth relatively stable in the near term, ”said Long.
The CO-OP report says the dollar amount of its members’ retail spending increased 13% on credit cards, but remained stable on debit. The CO-OP report shows the percentage movements by credit and debit separately, but does not contain any value or weight to assess the overall change of a category.
For example, the CO-OP report seemed to mirror the census report showing an increase in grocery spending and a decrease in restaurant spending; but the CO-OP data is unclear.
CO-OP reported that spending on “dining / entertainment” increased 1% per credit and decreased 4% per debit, while grocery spending increased 24% per credit and decreased 4% by debit.
John Patton, CO-OP’s senior payments advisor, said the report shows a shift towards credit card spending is occurring as members become more comfortable with their financial situation.
“Consumers have used their stimulus payments from the start of the year to pay off their credit card balances, as well as take advantage of low interest rates to refinance their balances into installment loans,” Patton said. “They have kept their lines open and are now opening their wallets to take advantage of this additional availability.”
Beth Phillips, CO-OP’s director of strategic portfolio growth, said credit unions should take advantage of the growing use of credit by their members this fall to prepare for an early holiday shopping season.
“We recommend that you increase your rewards and incentives now, before your members start their holiday shopping,” Phillips said. “Look at the data to see where your members are spending and target those categories and merchants with special incentives to get your card at the top of the wallet. Plus, start planning for post-vacation balance growth opportunities now.