Q2 Comes in Flat as June Retail Sales Waver

The stats are in, and the June retail sales report was less robust than the industry would have liked. But apart from its lukewarm assessment, several silver linings and macro trends are keeping analysts cautiously optimistic about the months ahead.

In February, we predicted modest sales gains throughout 2013, with uncertain levels of consumer confidence reinforcing these conservative estimates. So far, our growth projections have been reasonably accurate: consumer spending and retail sales in the first two quarters—and in June especially—have experienced only modest growth.

In June, sales increased 0.4 percent, which missed the consensus estimate of 0.8 percent and decreased slightly from May’s 0.5 percent growth rate. Auto and gasoline sales played a large role in buoying June’s numbers; Americans bought more cars and trucks, and the industry enjoyed its best first half of the year since 2007. Still, apart from the more volatile auto and gas sectors, core retail sales only rose by 0.2 percent, as households spent more at furniture and general merchandise stores, but dialed back on nonessentials such as electronics and restaurants.

What do these numbers suggest? Despite steady economic recovery, U.S. consumers remain cautious. Tight purse strings may be the result of higher taxes and uncertainty surrounding drawn out policy issues. On the brighter side, the U.S. has added an average of 202,000 jobs per month since January 1, which has boosted discretionary income levels and contributed to real increases in confidence. As it turns out, consumer confidence is on the up and up. Thanks to solid job gains, a stable stock market and high property values, Americans are more optimistic about their finances than they have been in the last five years.

Overall, it’s important keep in mind that U.S. consumers have adjusted their spending to a slow growth model; however, many analysts and the NRF agree that falling unemployment rates, household income gains and boosts in confidence may be enough to propel reserved spending growth and produce a rebound after weaker-than-expected demand in Q2.

Stay tuned as we continue to dissect and analyze the economic influencers of retail throughout the rest of the year, including the quickly approaching back-to-school season.