Our Drunken Sailors Are Still at it, Splurging Online, Buying Cars, Eating Out

But the 26% plunge in gasoline prices hit gas stations. The pandemic home-remodeling & furnishing boom is over. Ecommerce is still killing department stores.

By Wolf Richter for WOLF STREET.

Retailers have a problem: Prices are no longer easy to jack up. Inflation shifted to services last year where it still rages. But inflation in goods has cooled, and goods is what retailers sell. Gasoline prices have plunged from the peak a year ago; food prices on a month-to-month basis have leveled off this year and even dipped a little; and durable goods prices are up less than 1% from a year ago, with some categories showing declines (detailed discussion on the Fed’s favored inflation measure). Prices are reflected in revenues, and when prices don’t rise, or when they fall, revenues get hit.

And yet, despite these pricing dynamics, retailers reported that the drunken sailors still haven’t sobered up.

Retail sales rose 0.2% in June from May, after the upwardly revised 0.5% jump in May from April, and 1.5% from a year ago, seasonally adjusted. Not seasonally adjusted, sales rose by 1.7% from a year ago to $705 billion. And this despite the large-scale shift of spending from goods to services over the past year or so.

Sales growth continues to be driven by large gains in ecommerce, despite all predictions that people would return to brick and mortar stores. Sales at auto dealers jumped over the past three months, and we knew that from the jump in new-vehicle unit sales. But at gas stations, sales plunged 19% year-over-year due to the 26% price-plunge in gasoline from the peak last year (you’ll see in the chart further down that overlays sales at gas stations and the CPI for gasoline).

Retail sales are not a measure of consumer spending. We track consumer spending separately, which includes not only goods, but also services where consumers spend nearly two-thirds of their money, and it’s adjusted for inflation.

The charts below show the three-month moving average to tamp down on the drama of the monthly ups and downs that obscure the trends.

Retail sales, in terms of the three-month moving average, rose 0.4% from the prior month and was up 1.6% year-over-year. This is a weird looking chart for the history books on how to overstimulate an economy with government handouts:

Retail sales by category, 3-month moving average, seasonally adjusted.

New and Used Vehicle and Parts Dealers (22% of retail sales):

  • Sales: $132 billion
  • From prior month: +0.9%
  • Year-over-year: +3.4%
  • CPI used vehicles: -0.5% for the month, -5.2% year-over-year
  • CPI new vehicles: 0% for the month, +4.1% year-over-year.

Ecommerce and other “nonstore retailers” (19% of total retail sales), ecommerce retailers, ecommerce operations of brick-and-mortar retailers, and stalls and markets:

  • Sales: $113 billion
  • From prior month: +1.3%
  • Year-over-year: +8.0%

Food services and drinking places (15% of total retail), includes restaurants, cafeterias, bars, etc. Note that Americans now spend quite a bit more at restaurants and watering holes ($89 million in June) than at grocery stores ($82 billion, next chart down):

  • Sales: $89 billion
  • From prior month: +0.6%
  • Year-over-year: +9.0%
  • CPI for “food away from home”: +0.4% for the month, +7.7% year over year:

Food and Beverage Stores (14% of total retail). You can see the leveling off and slight dipping of grocery prices in recent months:

  • Sales: $82 billion
  • From prior month: -0.3%
  • Year-over-year: +2.6%
  • CPI for “food at home”: 0% month-to-month, +4.7% year over year:

General merchandise stores, without department stores (10% of total retail):

  • Sales: $61 billion
  • From prior month: +0.6%
  • Year-over-year: +2.6%

Gas stations (9% of total retail):

  • Sales: $53 billion
  • From prior month: -1.5%
  • Year-over-year: -19.2%
  • CPI for gasoline: +1.0% for the month, -26.5% year over year:

This chart shows the CPI for gasoline (green, right axis) and sales in billions of dollars at gas stations, including other merchandise gas stations sell (red, left axis). It shows that the sales declines are driven by price declines, not because consumers are driving less:

Building materials, garden supply and equipment stores (7% of total retail). Home remodeling boom is over, back to normal:

  • Sales: $42 billion
  • From prior month: 0%
  • Year-over-year: -3.3%

Clothing and accessory stores (4% of total retail):

  • Sales: $26 billion
  • From prior month: +0.3%
  • Year-over-year: -0.4%
  • CPI apparel: +0.3% for the month, +3.6% year-over-year.

Miscellaneous store retailers, includes cannabis stores (2.6% of total retail): Specialty stores, from art-supply stores to wine-making supply stores. Cannabis stores are the growth driver.

  • Sales: $15.5 billion
  • Month over month: +0.7%.
  • Year-over-year: +2.3%

The Cannabis Benchmarks U.S. Spot Index reported that the average price in the US dipped in June from May and was down 5.1% year-over-year. The chart reflects in part the drop in price of cannabis products, with the sharpest price drops having occurred starting in early 2022 through March 2023:

Furniture and home furnishing stores (1.9% of total retail). Clearly, the pandemic boom of sprucing up the house is over, and the entire pandemic-bubble has been unwound. Now it’s back to trend:

  • Sales: $11.2 billion
  • From prior month: -0.4%
  • Year-over-year: -7.0%

Department stores are on their way out, now down to 1.3% of total retail sales, from around 10% in the 1990s. Most of them have vanished. Just a few chains are still open, and they’ve been closing stores for years. Consumers are buying the exact same stuff online, including at the ecommerce sites of the few surviving department store chains. Online sales by department stores are included in the ecommerce retail sales chart above.

  • Sales: $11.0 billion
  • From prior month: -1.2%
  • Year-over-year: -4.2%
  • From peak in 2001: -40% despite 21 years of inflation.

Sporting goods, hobby, book and music stores (1.4% of total retail); another bizarre pandemic-boom-is-unwinding chart:

  • Sales: $8.6 billion
  • Month over month: -0.5%
  • Year-over-year: -0.1%.

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