Retail Trends Hidden Behind Amazon Prime Day Sale, According to Kiplinger
In July, retail sales saw a modest increase of 0.2%, following a strong bump in June, according to the latest sales report. However, the underlying trend would have been weaker without the Amazon Prime Day sale.
The four-day promotion in July likely boosted consumer spending, with the largest marketer alongside Amazon being Google (Alphabet). Core retail sales (excluding gas and autos) also rose by a moderate 0.3% in July. Motor vehicle sales showed a strong rebound in June and July, while clothing, sporting goods, furniture, and e-commerce sales showed strength.
On the other hand, restaurant sales decreased by 0.4% in July. Building materials and electronics/appliance sales also declined during the same period. Some purchases may slow down due to tariff-related price increases, which are starting to show up in the Consumer Price Index.
Spending on services, excluding dining, rose a moderate 0.3% in June. Total retail sales (excluding restaurants) increased by 0.7% in July.
However, uncertainties regarding the White House's tariff policy are putting a ceiling on further increases in sentiment. Consumer sentiment ticked up in July but went back down in early August. The sales report is not inflation-adjusted, so sales increases in tariff-affected categories may be partly illusory.
Moreover, spending will be affected by flattening income growth later this year due to a slowdown in hiring. The unemployment rate may not rise much, but the fear of job losses will likely boost the household savings rate to 4.5%.
As auto dealers may still have pretariff inventory to sell, the impact of tariffs on the retail sector remains to be seen. The overall economy could face a headwind due to more saving means less spending on current consumption.
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