Retail sales eke out August gain despite delta, supply snags

Retail sales eke out August gain despite delta, supply snags
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Retail sales rose slightly in August despite soaring cases of COVID-19 and supply chain snags, reversing from a decline in July and beating expectations of another decrease.

Sales for retail and food services totaled $618.7 billion last month, according to data released Thursday by the Commerce Department, rising 0.7 percent after falling 1.8 percent in July. 

Analysts expected retail sales to decline another 0.8 percent in August, according to consensus estimates, as the delta variant dramatically slowed job growth, walloped consumer confidence surveys and created more disruption in supply lines. But a surge of online shopping and sharp increases in sales at large retailers and furniture stores helped offset pullbacks driven largely by pandemic forces.

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“Retail sales in August overcame unusual twists and turns that have affected shopping behavior both in terms of the timing and composition of sales,” said Jack Kleinhenz, chief economist for the National Retail Federation, a trade group for retailers.

“The consumer remains rock solid despite the trifecta of macroeconomic headwinds we’ve seen this year, including tapering off of government stimulus, elevated COVID-19 infections and ongoing supply chain challenges in the form of shortages of labor and goods.”

Sales by non-store retailers rose 5.3 percent in August after falling 4.6 percent in July, and sales at general merchandise stores rose 3.5 percent. Furniture sales also rose 3.4 percent after falling 0.1 percent in July, and food and beverage stores posted a 1.8 percent gain.

Even so, activity fell off in several sectors highly vulnerable to rising COVID-19 cases, recent shortages of computer chips and backlogs exacerbated by shipping delays.

Restaurants and bars saw sales flatline in August as the sector lost 42,000 jobs. Economists have attributed both setbacks to the delta surge fueling health concerns and pushing people away from in-person dining and drinking.

Sales by electronics and appliance stores dropped 3.1 percent in August as chip shortages and shipping backlogs pushed prices higher. Motor vehicle and auto part sales also sank 3.6 percent, likely due to a summer surge in new and used car prices that have slowly begun to reverse.

“Inventories are so tight that some smaller dealers are unsure they will be able to cover overhead costs and could go under if inventories can’t be replenished soon,” said Diane Swonk, chief economist at Grant Thornton.

“The automakers, for their part, have been leaving out chips that add to the bells and whistles but not the functionality of vehicles to get more on dealer lots.”

Swonk added that the impact of delta may take an even greater toll on retailers over the coming months, which could make holiday shopping difficult.

“Brace yourselves for slim pickings on store shelves this holiday season,” she said.