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Retail Sales Rise, COVID Surge Threatens Progress

Greater consumer spending sent U.S. retail sales up 7.5% in June.

Retail sales in the United States increased 7.5% in June as societal lockdown measures lifted or eased around the country, but the rebound may be short-lived given the current surge in new coronavirus cases.

June Retail Numbers

In reporting on June retail sales, the U.S. Department of Commerce said the increase occurred thanks in part to a rise in consumer spending on vehicles, furniture, clothing and electronics. Retail sales, which measure purchases at stores, restaurants and online, rose to $524.3 billion in June. That was up from $487.7 billion and almost back to pre-pandemic levels.

While overall sales were up, business at non-store retailers, which include online sellers like Amazon, decreased by 2.4%, according to the Commerce Department. That drawback indicates consumers took advantage of eased stay-at-home orders and did more shopping at brick-and-mortar stores.

Despite the positive June, retail sales in July and August could be a different a story, some analysts say. New cases of COVID-19 are being diagnosed at historic daily rates in the United States, with certain Sun Belt states especially hard hit. That’s prompted some states, including the nation’s most populous, California, to rollback reopening initiatives. The rollbacks are set to negatively affect consumer spending.

“It’s … clear now that things have faded,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, told The Wall Street Journal. “It’s going to take a long time to wring this out of the system to the point that we can re-reopen the economy properly.”

Richard Moody, chief economist at Regions Financial Corp., told the Journal that “it may be a flatter trajectory upwards” for retail sales as virus cases increase.

Consumer spending accounts for about two-thirds of the U.S. economy. Retail sales represent about a quarter of consumer spending.

The rapid escalation in COVID-19 cases that could derail retail’s resurgence is also poised to impact the promotional products industry. Promo pros have generally reported improving sales conditions starting in May and rising through June, but the coronavirus flare up is threatening that. Overall, promo distributors’ sales experienced a historic decline in the second quarter of 2020, freefalling 44.4% year-over-year.