Retail Posts Another Good Month, but...
According to the National Retail Federation, consumers boosted their total retail spending year-over-year by 6.6% in June 2018, with pure retail spending, which excludes automobiles, gas and restaurants, increasing by 4.2%. While this is excellent news for firing additional coffin nails at the "retail apocalypse" moniker, not only is the increase off the back of a weak prior June, but what is more concerning is that pure retail's proportionate share of total retail spending has fallen to its lowest level in over four years.
This is not to diminish the positive outlook of the gains that are no doubt attributable to a robust economy. However, product retail remains largely unsuccessful at shifting consumers out of the experience economy. The positive increase in total retail is driven by food service sales increasing by 9%, auto sales by 5%, and with higher gas prices, gas stations sucked up wage increases and tax cut benefits with sales rising by a whopping 20.8%
There are prevalent signs that the robust economy will eventually shift, which could have a significant negative impact on product retail as consumers are becoming progressively more concerned with higher inflation, higher gas prices, the impact of tariffs and increases in household debt. Amidst these warning signs, while the sharp turn in retail that was predicted last year is unlikely, it is prudent for retailers to prepare for potential troubled waters in the coming months.