2017 spending trend reverting to weakness

Second quarter signs of improvement in consumer spending did indeed prove short lived as indicated by the latest retail sales.

The letup was predicted by recent measures of consumers’ confidence to spend over the next 90 days, which have turned flat among Millennial and Gen X households. See more here.

In June, retail sales growth reverted toward a 3.0% year-to-year growth pace after moving higher in April and May. Persisting e-commerce gains remain an exception. (See this post, for the big-picture e-commerce impact.)

The uneven growth continues to suggest that retail and consumer goods have failed to benefit much from a Boomer-led improvement in confidence in the wake of the November U.S. election.

Here is more on what the latest retail numbers say:

  • Monthly trend. In June, sales grew a relatively weak 2.7% year-to-year on a seasonally-adjusted basis and 3.1% on an unadjusted basis for retail channels excluding autos, fuel and restaurants. This is down from growth of 3.6% or higher the prior two months, including a 5% gain in May on an unadjusted basis.
  • Quarterly trend. Despite the June letup, the second quarter generally outperformed the trend of roughly 3.0% average growth for the prior three quarters. The first quarter was particularly weak measured in unadjusted terms, primarily because of a weak February likely affected by weather.
  • Annual trend. 2017 is shaping up to be a below-average growth year across a number of measures. Even restaurant and auto sales have slowed significantly—although they still remain healthier than traditional retail segments (excluding restaurants and autos).
  • Strong channels. Beyond strength in ecommerce or online sales, home improvement is the only traditional store channel showing strength in June. Auto dealers also showed strength in June.
  • Weak channels. Weakness at sporting goods, clothing, and grocery stores were among the range of all other channels showing signs of weakness in terms of either month-to-month or year-to-year growth.

The latest data suggest that the year-to-date retail sales pace is running well below the stronger pace forecast for 2017—by half a percentage point in seasonally adjusted terms and nearly a full percentage point in unadjusted terms.

MacroSavvy™ has forecast a 2017 gain of 4.0% in retail sales excluding autos, fuel and restaurants, which would be slightly stronger than 2016.

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