Retail Sales: Rough Days Ahead At The Register?

Four consecutive months into positive consumer spending trends, one wonders if there might be — indeed must be — a lull, a pullback that might indicate a tougher road ahead for retailers headed into the all-important holiday spending season.

In term of headline numbers, the U.S. Census Bureau reported that retail sales in August were up 60 basis points over July. That represents a slowdown from the 90 basis point gains seen in July (itself revised down by 1.2 percent over June).

Drilling down a bit into the numbers, clothing and accessory spending was up 2.9 percent month over month. Furniture was up 2.1 percent on a month-to-month basis. And in a sign that electronics spending might be a bit muted, electronics (and the stores that sell those goods, including appliances) were up 80 basis points.

It must be said that it could be said that gains are gains, and that a chained (linked) series of growth data points indicate that shoppers are returning to brick-and-mortar stores.

But a look at the year-over-year data show just how we’ve fallen, in what might be termed the traditional “dry” powder season that leads us into the holidays. To give just a few examples, the Census data show that clothing sales, as measured in August, were down more than 20 percent.  Stretch a little further and compare the eight months of 2020 (thus far) to the eight months of 2019, and total retail and food services were down 1.8 percent. Electronics and appliance stores were down 16.8 percent, and clothing/clothing stores were down 34.9 percent, according to the data.

eCommerce Muted?

Interestingly, sales at non-store retailers, which includes online sales, were flat versus the previous month.

This seems to signal that the back-to-school surge that typically accompanies August had not in fact surged. (We’ll assume that the furniture sales growth and the electronic sales growth that were recorded were spurred at least in part by, say, desks and laptops.)

Spending at grocery stores was down 1.6 percent, which may indicate that fridges are full, and that the “stocking up” that marked the pandemic has, in fact, eased.

Proprietary research from PYMNTS found that total retail and food services sales were roughly $546 billion in August, down from the roughly $551 billion in July. That’s a change from historical norms when August is usually higher than July.

A bit more granularly, similar patterns are seen segment by segment. Notable exceptions here can be found in non-store retailers, which includes eCommerce, where PYMNTS found that this vertical was about $78 billion in August, where it had been $81.7 billion in the previous month. (Product level detail is not available.) In addition, food and beverage stores also saw a dip month over month to a recent $71.6 billion, down from $74.2 billion in July.

The August showing comes as stimulus payments petered out, although unemployment also slipped. The question becomes what happens as the $600-a-week benefits are in the rearview mirror.

Interestingly, as PYMNTS reported, the National Bureau of Economic Research (NBER) found that of the recipients of the $1,200 stimulus payments, 33 percent of the roughly 12,000 individuals queried said they saved the payments, while 52 percent paid down debt.

The NBER found that only 15 percent spent the funds, and then only a portion of the money, at about 40 percent. Breaking that down, of the remaining 60 percent, half went to savings, and half went to pay down debt.

None of this bodes particularly well for an upswing at the register in the months ahead. That’s especially true if we see more waves of the pandemic, and if the economy wobbles. That portion of stimulus funds yet unspent and uncommitted (to paying down debt) will likely remain saved or used for bare necessities — and not holiday gifting.

The heat of August, then, may give way to a distinct chill — at (brick-and-mortar and virtual) registers.