What Americans bought in July with their savings at the gas pump
US consumers are taking advantage of lower prices at the pump to keep spending on items like electronics, furniture, and books, according to a new report from the US Census Bureau.
Stripping out gasoline and cars, retail sales rose by 0.7% in the month of July—at the same pace as in June. Including those items, spending overall was flat.
Part of the increase was due to higher prices—retail sales are not adjusted for inflation—but big jumps in some categories suggest that not the only reason. Online sales, for example, rose by 2.7% month-over-month, owing in part to Amazon’s Prime Day, which the company said was the biggest in its history.
“Retail sales are holding their own right now,” said Ted Rossman, a Bankrate analyst, in an email. “That’s actually a pretty good sign for consumers and the economy, all things considered.”
The strong report gives the US Federal Reserve ammunition to continue hiking interest rates at an aggressive pace to bring inflation closer to its 2% target. Americans spending abroad—while not captured in this report—are also buoying other economies teetering on a recession, including in Europe.
Inflation is driving new consumer habits
Though gasoline prices are down, Americans are still contending with historically high inflation on other products, including food.
In response, consumers seem to be hunting for discounts online and at retailers known for their low prices. Walmart, for example, said its stores are attracting wealthier customers than usual as American families try to save money. The company reported better-than-expected second-quarter earnings on Tuesday.
At the same time, retailers are still struggling with the after-effects of pandemic disruptions. Apparel sales dipped in July as stores tried to manage excess inventory by offering heavy discounts—though August will likely see a pick-up as back-to-school shopping gets underway.
While some had anticipated a drop-off in home spending as the pandemic subsides, the wear and tear from being at home mixed with running lists of pending home improvement projects led to higher spending on furniture and items related to construction, said Katie Thomas, the lead at the Kearney Consumer Institute. Yesterday Home Depot reported its “highest quarterly sales and earnings in [the] company’s history.”
As long as gas prices remain low, Americans are likely to keep up their spending, but many companies are managing expenses tightly in case of a pullback.
