Americans continued and even increased their spending last month, shifting from expenditures on sporting equipment and building materials, in heavy demand during the pandemic, to restaurant outings and buying electronics.
U.S. retail sales rose a seasonal adjusted 0.6% in June from the month before, the U.S. Commerce Department said Friday. The increase was a surprise to Wall Street analysts, who had expected sales to fall slightly last month. Excluding autos, sales leapt 1.3% in June.
The data shows a pivot from “comfort spending” by Americans stuck at home to buying things such as clothing and makeup “now that we’re unmasking,” Diane Swonk, chief economist at Grant Thornton, an independent tax advisory firm, told CBSN.
The rise came as pandemic-related restrictions loosened across the country, with sales at bars and restaurants up 2.3%, according to Friday’s report. Clothing store sales rose by 2.6%, and sales at electronics shops were up 3.3%.
“The great spending rotation saw households cut back on furniture, autos, sporting equipment and building material — categories that outperformed during the pandemic — while spending more freely at restaurants and bars, gas stations and electronic stores,” offered Oxford Economics economists Gregory Daco and Lydia Boussour in a note to clients.
The June increase came with a downward revision for May, off 1.7%. Still, retail activity ended the second quarter of the year on an upbeat note, amid continued robust household demand.
Swonk expects additional spending on services such as child care, as parents getchecks. But the monthly financial assistance is slated to end by 2022, so anything the payments do to help people return to work could be short-lived, she cautioned.
Inflation is “likely to be transitory,” but the longer-term impact of the current cycles in not yet known, the economist said of the recent spike in prices that has Americans, including food, gas and other basics.
Spending may well slow in the third quarter, “even as job growth restores incomes, but savings diminish and fiscal support expires,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, told investors in a report.