Retail sales in the United States declined in July 2021 compared to the month prior, while a closely watched index on U.S. consumer sentiment dramatically plunged in early August to a reading that was lower than depths experienced during the widespread societal lockdowns of April 2020.

Analysts said rising COVID-19 cases and hospitalizations spurred by the delta variant are to blame for economic angst, which has potential implications for the promotional products market – an industry that tends to be affected, either positively or negatively, by the general direction of the economy.

“The delta variant seems to have hurt consumer confidence more than actual sales, but slowing growth is worth watching,” Ted Rossman, senior industry analyst at CreditCards.com, told Fox Business. He added that fall and winter could pose greater challenges, particularly for businesses in hospitality like bars and restaurants.

The Commerce Department reported that U.S. retail and food services sales in July were $617.7 billion, down 1.1% from June. Sales at automotive dealerships and furniture retailers were key factors in the decline, dropping 4.3% and 6.07%, respectively.

⚠️BREAKING:

*U.S. RETAIL SALES TUMBLE -1.1% IN JULY; EST. -0.3% pic.twitter.com/DF4sHmIinj

— Investing.com (@Investingcom) August 17, 2021

Meanwhile, the University of Michigan’s index on consumer sentiment dropped 13.5% from July during the first couple of weeks of August. The index’s reading of 70.2 was below the 71.8 seen in April 2020 – the height of COVID-19 lockdowns in the United States.

“Consumers reported a stunning loss of confidence in the first half of August,” said Richard Curtin, who spearheads the University of Michigan’s research on the index. “The losses in early August were widespread across income, age and education subgroups and observed across all regions. Moreover, the loses covered all aspects of the economy, from personal finances to prospects for the economy, including inflation and unemployment.”

U.S. consumer sentiment fell in early August to the lowest level in nearly a decade, with the U. of Michigan index dropping far below the lowest estimates. Consumers seem to be losing confidence in the face of resurgent Covid cases and higher prices. https://t.co/kaOKaST2nd

— Lisa Abramowicz (@lisaabramowicz1) August 13, 2021

Nonetheless, there were positive caveats and bright spots.

For instance, the Commerce Department data showed that retail sales were up nearly 16% year over year in July. Sales at clothing and clothing accessories stores were up 43.4% from July 2020 (up 2.8% over June 2021), while food services and drinking places were up 38.4% from last year (3% from June). Overall, total sales for the May 2021 through July 2021 period were up 20.6% from the same period a year ago.

Meanwhile, Curtin noted that the drop in consumer sentiment may be heavily driven by disappointment and emotion – and therefore could moderate.

“Consumers have correctly reasoned that the economy’s performance will be diminished over the next several months, but the extraordinary surge in negative economic assessments also reflects an emotional response, mainly from dashed hopes that the pandemic would soon end,” Curtin said. “In the months ahead, it is likely that consumers will again voice more reasonable expectations, and with control of the delta variant, shift toward outright optimism.”