Goods spending holds up even amid pivot to services
|Summary
The take away from the June retail sales report is that while some demand was clearly pulled forward over the past year in categories like sporting goods, building materials & garden supplies, and (to a lesser extent) autos, consumers' transition to spending more on services need not come with a sharp decline in goods outlays.
Pivot to services Is a headwind for retailers, but not Insurmountable
Retail sales increased 0.6% in June despite consensus expectations for a second straight monthly decline. There has been a lot of hand-wringing in recent weeks over whether the pivot from spending on things to spending on experiences would cause an air-pocket goods spending. We have maintained the view that even though services will be the primary driver of consumer spending this year, goods spending can still hold up. Despite the headline gain, today's report is not a complete vindication for our view on this. Some of the categories that drove the post-pandemic spending surge last year were the very ones to post declines this month.
Last summer parents were trying to get their hands on basketball hoops and trampolines, and spending more time working in the yard or fixing up the house. This summer, the kids are headed back to camp or the family is ready to hit the road. Amid this shift, we find that sporting goods & hobby stores posted the third straight monthly decline while building materials & garden equipment stores also fell for a third straight month. Meanwhile, bigger ticket durable goods items like furniture and motor vehicles both posted back-to-back monthly declines. In the case of autos, the problem is ongoing supply chain problems. The demand is there. Just look at the spike used auto prices for proof.
Download The Full Economic Indicators
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.