Retail Sales Rebound in May, Business and Consumer Sentiment Continue to Decline

According to the National Association of Manufacturers’ (NAM) Monday Economic Report for this week, retail sales rose 1.0% in June, rebounding after edging down 0.1% in May. Excluding gasoline station sales, retail spending increased 0.7%. The largest increases in retail spending in June occurred for nonstore retailers (up 2.2%), furniture and home furnishings stores (up 1.4%), miscellaneous store retailers (up 1.4%), food services and drinking places (up 1.0%), motor vehicle and parts dealers (up 0.8%) and sporting goods and hobby stores (up 0.8%), among others. Sales fell for department stores (down 2.6%), building material and garden supply stores (down 0.9%), clothing and accessories stores (down 0.4%) and health and personal care stores (down 0.1%).

The Index of Consumer Sentiment inched up from a record low 50.0 in June to 51.1 in July, according to preliminary data from the University of Michigan and Thomson Reuters. Despite marginal progress, consumers remain anxious, with sentiment near the lowest readings in the survey’s history. Americans continued to worry about inflation, particularly as higher prices dampen their purchasing power and overall household finances.

The National Federation of Independent Business reported that the Small Business Optimism Index fell from 93.1 in May to 89.5 in June, the lowest level since March 2013. Supply chain disruptions, workforce shortages and inflation continued to challenge small business owners. The net percentage of respondents saying that general business conditions would be better six months from now declined from -54% to -61%, a record low in the 48-year history of the survey. Respondents cited inflation as the top “single most important problem,” followed by difficulties in obtaining enough qualified labor.