WASHINGTON — Consumers picked up spending in July, spurred by lower gas prices and online promotional activity by Amazon and other retailers that contributed to strong retail sales gains, the U.S. Commerce Department’s monthly report revealed Thursday.
Sales at apparel and accessories stores rose a seasonally adjusted 0.4 percent to $21.4 billion, but sales at department stores dropped 0.8 percent to $13.7 billion last month. Sales at general merchandise stores, a category that includes department stores and discounters, fell 0.5 percent to $56 billion.
However, in the broader economy, retail sales rose 0.6 percent to $446.5 billion in July, meeting economists’ expectations.
Chris G. Christopher Jr., director of U.S. consumer economics at IHS Global Insight, said the bounce back in retail sales was driven primarily by discretionary spending on clothing and items such as furniture and building materials, as well as autos.
“Consumers came back to life in July after lying low in June,” Christopher said. “Discretionary spending improved significantly, sending a clear signal that the back-to-school retail sales outlook is looking relatively positive. In addition, our consumer spending outlook for the third and fourth quarters is also looking relatively bright, due to real disposable income gains, modest consumer price inflation, lower energy prices, relatively good employment gains and a housing market that is gaining traction.”
He said online sales got a big boost from Amazon’s “Prime Day” event on July 15, which IHS said drove a 1.5 percent increase in total non-store retail sales compared with June. Amazon’s shopping holiday set up a competitive duel with Wal-Mart Stores Inc., which also drove online sales.
“Over the past several years, online retail sales have started to make a sizable dent in brick-and-mortar sales,” Christopher said. “Online holiday and back-to-school retail sales growth is likely to outpace last year’s growth, and is a major game-changer. We expect approximately $1 out of every $6 of holiday retail sales to be spent online this year.”
The firm is also forecasting that August retail sales will outpace July’s. Christopher gave the b-t-s retail sales season a grade of B+. He said IHS is forecasting a 3.7 percent increase in b-t-s retail sales compared with last year, which hit about $587.58 billion, a 4.3 percent increase over 2013.
IHS defines b-t-s sales on a non-seasonally adjusted basis and excludes autos, gasoline, grocery and liquor stores, and restaurants.
“We think the consumer is finally finding some rhythm,” said Ryan Sweet, director of real-time economics at Moody’s Analytics. “For a little time, consumers were cautious about spending the windfall from lower gas prices. We have started to see consumers now start dipping into that windfall, where, previously, most of it ended up in savings.”
Sweet said the “Black Friday” type of promotion by Amazon and other retailers doing online business boosted sales significantly in July.
“Overall, the trend is favorable. Consumers seem to be bouncing back after a disappointing first half of the year,” Sweet said. “The fundamentals are favorable for back-to-school shopping. Gas prices are heading lower, the job market is tightening quickly and there is a whiff of wage group picking up. That should do wonders to consumer spending overall.”