skip navigation

Stay up to date on timely topics and market events. Subscribe to our Blog now.

July 15, 2022

Retail Sales Gains Continue to Reflect Only Higher Prices

By Michael J. Bazdarich, PhD

Stay up to date on timely topics and market events. Subscribe to our Blog now.

Headline retail sales rose by 1.0% in June, with the May sales estimate revised upward by 0.1%. The more widely watched control sales measure (sales excluding motor vehicle dealers, service stations, building material stores and restaurants) rose 0.8% in June, with a -0.1% revision to May’s estimate. With goods prices up 2.0% in June and goods prices excluding food and energy up 0.8%, it is clear that essentially all of the June sales rise reflects higher prices rather than any increase in actual sales volume.

Indeed, real “control” sales have been slowly but steadily declining for the last 15 months, so the June declines are nothing new. The June declines—net of inflation—were actually somewhat milder than we had seen over the last six months, but this might merely reflect the fact that May’s declines were especially sharp. Actual retail prices through May are reflected in the chart, with June prices estimated from the Consumer Price Index (CPI) release.

Exhibit 1: Retail Sales Trends
Explore Retail Sales Trends
Source: Census Bureau, Bureau of Economic Analysis, Bureau of Labor Statistics, Western Asset. As of 30 Jun 22. Select the image to expand the view.

In terms of various store types, the largest sales gains were at gas stations, with nominal (dollar) sales up 3.6%, but that, of course, was where prices rose most sharply, with gasoline prices up 11.2%. The fact that gasoline sales fell so sharply net of inflation, even in the first month of the summer driving season, indicates that consumers are beginning to adjust to higher prices by changing their lifestyles. True, this reflects the pain of higher prices, but it also is part of the economic process by which market forces will eventually redirect economic resources and work to lower gas prices.

The other area where nominal sales gains were notable was non-store merchants, reflecting mostly the online behemoths. There, we reckon that real (inflation-adjusted) sales were up 1.3% in June. However, that follows a -1.5% real drop in May, so even there, the recent trend is flat or falling in real terms.

Elsewhere, sales were generally down further in June when price changes were allowed for. The exceptions were slight likely real gains for books and sporting goods stores, furniture stores, and for restaurants. Among these, only restaurants have shown any ongoing gains net of inflation in recent months. Those gains reflect further post-Covid reopenings and are more than offset by declining real sales at grocery stores.

© Western Asset Management Company, LLC 2023. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorized and regulated by Comissão de Valores Mobiliários and Brazilian Central Bank. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”) (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.