The US advance estimates of retail and food service sales in July 2021 declined slightly from June. Retail sales recorded a seasonally adjusted total of $617.7 billion in July, a 1.1% decrease from the prior month. Although retail sales displayed a slight contraction in July, this drawback isn't enough to shift the positive outlook for the remainder of the year. Retailers continue to address continuing supply chain disruptions while adapting to the shift in consumer spending as increasing vaccinations afford consumers the ability to return to traditional pre-pandemic activities such as going to sporting events, participating in the traditional dine-in experience, and traveling in spite of the Delta variant.
Regarding the supply side of the economy, the reopening of the economy should continue for the remainder of the year. However, with increasing cases and the Delta variant, mask mandates in certain portions of the country have been reinstated. With increasing vaccinations, consumers should feel more at ease, completely re-engaging with the economy. Furthermore, as supply constraints relax, production should increase, which should provide retailers with the opportunity to reconstruct inventories.
Although facing the Delta variant, price increases, and supply chain challenges, demand persists as consumers and the overall economy show resilience and strength supported by July's advance tax credit payments, personal incomes, and labor market gains. Consumers spent at a quick pace throughout the first half of the year and are expected to continue driving the economy through the second half as pent-up demand has not yet been fully unchained. Consumers continue to hold onto excess savings as spending transitions from goods toward services. Furthermore, traditional back-to-school shopping seasons, in addition to more typical shopping patterns for the year's remaining holidays, should motivate consumption to return to pre-pandemic trends.
While retail total sales from July were down 1.1% from June, overall retail sales were up 15.8% from year-ago levels. Retail sales for July were down in all but five retail categories on a month-over-month basis while sales on a year-over-year basis were up in every category, which was led by increases in clothing and clothing accessory stores, food services and drinking places, and gasoline stations at 43.3%, 38.4%, and 37.4%, respectively.