Declining auto sales contribute majorly to an overall decline in retail sales
By Yashasvini Razdan, 7:00 PM ET
Retail sales for July fell 1.1%, beating the Dow Jones estimate of a 0.3% decline and fell way below the upwardly revised 0.7% increase in June.
July saw a decline in sales to $617.7 from a revised figure of $624.7 billion in June. Despite month-over-month decline, July’s figures still represented a 15.8% acceleration from the same time a year ago.
A large fraction of the monthly decline came from motor vehicles and parts dealers, which fell 3.9%. The auto sector has been a major contributor to the inflation surge in 2021 as the prices of used car prices sprung higher amid rising demand.
Figures showed that excluding automobiles, sales fell 0.4%.
The global chip shortage has hit sales and profits all over the world and has left the auto industry battered and bruised as manufacturers scramble to accumulate parts amid factory shutdowns.
In July, 17 auto factories in North America and Europe halted or reduced production over the scarcity of various components, affecting plants in Michigan, Kentucky, Kansas, Mexico, Canada and Germany, according to Seraph Consulting, which advises the manufacturers on these shortages.
Ford, General Motors, Tesla, BMW and Daimler are among the automobile companies that have reported difficulties in securing semiconductor chips for their products.
Clothing stores saw a 2.6% decline, and sporting goods, musical instrument and book stores fell 1.9%. Online sales also posted a 3.1% drop.
Despite this, the recent earnings reports showed an upbeat outlook. Sales rose 59% at Macy's and 31.4% at Kohl's in the second quarter, as social events resumed causing shoppers to splurge on clothing, footwear and cosmetics, and offices gradually reopened in the United States, following vaccinations.
Shares of the cosmetics maker Estee Lauder rose 2.5%, as sales in its makeup division climbed for the first time in more than a year, surging 76% in the fourth quarter.
Meanwhile sales at departmental stores and online stores, slowed, compared to the grocery hoarding frenzy during the beginning of the pandemic. Walmart’s same-store sales in the U.S. grew by 5.2%.
While the anxiety surrounding inflation pesters investors, central bank officials believe that inflation has met their 2% mandate, but there is still a need for the labor market to improve before the Fed starts decelerating the pace of its monthly bond purchases or increases interest rates.
After a steady decline in the COVID-19 case-count this spring, a rise has been noticed again at the end of the second quarter, as the highly contagious delta variant spreads through the country.
Even though the economy has surpassed its pre-pandemic lows, the impact of the waning fiscal stimulus, rising inflation which in turn weakens the purchasing power, and the spread of the Delta variant, analyst suggest that there might be a high probability that GDP growth may slow down.
(Inputs from Commerce Department)
Picture Credits: CNBC
