First Insight consumer survey

As July came to a close, retail sales dipped week to week, but showed an uptick year-over-year, according to data from The Retail Economist-Goldman Sachs Weekly Chain Store Sales Index.

The results came as consumer income and spending was tepid, but at least one economist expects expenditures to rise in the second half.

In the weekly sales report, the index fell by 0.5 percent for the week ended July 29. Year-over-year, sales gained 1.5 percent, said Michael P. Niemira, chief economist of The Retail Economist LLC. “Back-to-school shopping continued with three state’s having sales-tax holidays for school-type expenditures during the reporting period,” Niemira noted.

And there was strength in the apparel segment. “Although business was strongest for traditional grocery stores over the past week, electronics and apparel stores — which benefit from back-to-school spending — were the best-performing segments of the industry over the past week compared to last year,” Niemira said.

And following government data that revealed flat income for the second quarter as well as expenditures that were also weak, Chris G. Christopher, executive director of IHS Markit, said in a research note today that weaker spending demonstrates “that consumers have not thrown caution to the wind even though wage gains were strong and confidence is still rather elevated.”

Christopher said wages are a major driver for spending, and noted that “wage and salary compensation was rather robust in June, setting the stage for some nice spending gains in July.” The economist said that food and energy costs declined — a benefit to lower-income households. “Core consumer prices have mellowed out in recent months after a couple of large gains during the first two months of the year,” he added.

“Looking ahead, we are forecasting solid real consumer spending gains, but not above 3 percent,” Christopher said. “The first quarter showing on the real consumer spending front (revised up from 1.1 percent to 1.9 percent) was an aberration, influenced by unseasonably warmer weather, a spike in consumer price inflation, delayed income tax refunds and payback for a strong fourth quarter in holiday and auto sales.”

He went on to note that real consumer spending growth “came back to life in second quarter (up 2.8 percent), and we expect the last two quarters of the year to be similar.”

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