Retail sales growth falls short of expectations - Los Angeles Times
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Retail sales growth falls short of expectations

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Retail sales rose 0.2% in July in a slow-but-steady performance that suggests Americans aren’t ready to spend enough to kick the economy into a higher gear.

The month-to-month uptick represents the measure’s fourth straight gain, the Commerce Department said Tuesday. Core retail sales, which strip out spending on cars, gasoline and building materials, swung up 0.5% in the largest boost this year.

Analysts pointed to recent good news from the housing industry, the employment outlook and the stock market as the impetus for consumer spending — an important driver of economic growth.

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But the overall retail sales gauge fell short of Wall Street’s expectations of a 0.3% increase and showed slower growth than in June, which had enjoyed a 0.6% advance.

The government’s retail sales gauge “was far from robust†and fails “to eradicate fears of a consumer slowdown undermining growth in the second half of the year,†said Lindsey M. Piegza, chief economist at Sterne Agee.

“The effects of tax increases often take time to filter into consumers’ long-run spending patterns, and with government furloughs taking effect coupled with modest employment gains and minimal income growth, there is plenty of cause for caution,†she told clients.

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The National Retail Federation called the data in the government report a “mixed bag for retailers.â€

“Fiscal and monetary policy uncertainties combined with stagnant economic and employment conditions continue to breed a volatile market with extreme swings in consumer spending,†said Matthew Shay, the trade group’s chief executive, in a statement.

For the fourth year in a row, the economy suffered a soft patch in the spring and early summer, damping consumer spending, according to analyst Ken Perkins of Retail Metrics Inc. Gross domestic product rose 1.4% in the first half of the year, and the July employment report showed most of the growth in low-wage or part-time segments.

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Cooler-than-expected weather didn’t help and “had the effect of condensing the summer seasonal selling period, resulting in higher-than-planned markdowns for many retailers, particularly in the apparel space,†Perkins wrote in a note to clients.

So-so retail sales make it difficult to predict whether the Federal Reserve will move in the near future to taper its monthly purchases of Treasuries and mortgage debt, a strategy to boost borrowing. In a note to clients Tuesday, Credit Suisse analysts wrote that “these data wouldn’t appear to increase the urgency for a September Fed taper.â€

But compared with July 2012, retail sales have vastly improved, soaring 5.4%. Pollster Gallup said Tuesday that consumer confidence last week made its largest jump since mid-May and is trending higher this year than it did last year.

At the Beverly Center this week, swarms of parents trailed by youngsters swung into H&M, Foot Locker and other stores as they hunted for bargains.

Belinda Gervase, 43, had already spent $100 on a patterned Wet Seal dress and Aldo shoes for her daughter Evan, 11. The pair, along with Evan’s friend Sol Suda-Gonzales, 11, also planned to hit up Tilly’s and Bloomingdale’s.

With a fast-growing 16-year-old son at home and prices going up in stores, Gervase said she probably would end up spending $1,600 on the back-to-school season, mostly on clothing. Electronics could wait until the holidays, she said.

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“The sky’s the limit,†said Gervase, a Murietta-based Mary Kay director. “Shoppers are already out in malls, so you get the better stuff if you shop now. You wait, you lose, and everything’s sold out.â€

Sales of clothing and accessories were up 0.9% from June and 5.3% from last July, according to the government. Sporting goods retailers also did well.

A slew of retailers, including Target, Wal-Mart, Macy’s and Best Buy, are expected to report quarterly earnings in the next two weeks.

“July is traditionally clearance time, so if you can sell more product than you did last year, it’s good news,†said Marshal Cohen, an analyst with research firm NPD Group.

Consumers also upped their spending on eating in July, with sales at food and beverage stores getting a 0.8% boost, more than tripling the increase in June. Restaurants and other food service vendors reported a 0.6% uptick.

But in a potentially worrisome sign for the housing recovery, building material and garden equipment dealers saw month-to-month sales slide 0.4%, though they jumped 9.8% from a year earlier.

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Revenue in the furniture and home furnishings category dropped 1.4% from June. It’s also been slow going for electronics and appliance stores, whose sales fell 0.1%.

Though auto dealers saw a 13.3% surge in sales compared with last July, their sales fell 1.1% last month from June.

Analysts said many shoppers may still be withholding frivolous spending.

At the Beverly Center, Inglewood resident Donna Fernandez, 24, tried to simultaneously hang on to her son Jeremy, 5, and the $100 in shoes she had just bought for him in advance of the school year.

“I didn’t even shop in July,†she said. “There was no need. The next big event is Christmas.â€

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Twitter: @tiffhsulatimes

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