Retail sales in the U.S. declined in July as the number of coronavirus cases spiked, localities renewed some restrictions and businesses delayed their return to in-person work.
Sales dropped 1.1% in July compared to June and totaled $617.7 billion, according to the Census Bureau report released Tuesday. The decrease was driven mainly by declining used and new car sales, clothing purchases, building materials sales, sports goods sales and furniture purchases.
Economists expected retail sales to fall 0.3%, a relatively modest drop compared to the actual decline, CNBC reported. All major stock market indices declined between 0.5% and 0.8% on Tuesday morning following the worse-than-expected report.
“There are a lot of reasons for anxiety among investors in the short term if you look at the delta variant, of course, if you look at the inflationary outlook, if you look at U.S. policy uncertainty and kind of continued choppy economic data,” BMO Global Asset Management senior investment strategist Jon Adams told Yahoo Finance.
Excluding volatile vehicle and gasoline sales, total retail sales declined 0.7% last month. Car sales declined 3.9% in July, the largest drop of all major categories tracked by the government. (RELATED: US Labor Shortage Surges To New Record High As Unemployment Remains Elevated)
Gasoline and restaurants were among the few bright spots in the report, with sales rising 2.4% and 1.7%, respectively, compared to June.
In June, retail sales grew 0.6%, buoyed by states easing most coronavirus restrictions. However, coronavirus cases have surged in recent weeks, according to Centers for Disease Control and Prevention data.
Several major U.S. employers including Amazon, BlackRock and Wells Fargo have delayed their in-person return to work plans, CNBC reported. Localities like San Francisco have reintroduced strict social distancing and indoor capacity restrictions.
The U.S. economy grew at an annual rate of 6.5% between April and June, a recent Commerce Department report showed. The International Monetary Fund projected last month that the U.S. economy would grow 7% in 2021.
The National Retail Federation (NRF) predicted that total 2021 retail sales would exceed $4.44 trillion.
“July retail sales showed slight deceleration in spending, but nothing to derail our outlook for a record year,” NRF President and CEO Matthew Shay said in a statement Tuesday. “Though the delta variant is presenting health challenges while supply chain disruptions along with unfilled job openings are presenting business challenges, the consumer and broader economy continue to display steady strength”
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