Retail sales, excluding autos and gasoline, rise, pushing Atlanta Fed GDP to 2.5%

Auto sales hit by CDK hack. Gasoline and auto sales in dollar terms are hit by lower prices, but boost inflation-adjusted consumer spending.

Retail sales excluding gasoline and autos jumped 0.8% in June from May, seasonally adjusted, the largest increase Since January 2023, rising prices have spread across many retail categories, including a massive surge in online sales. Year-over-year, they have increased by 3.8%. This month-over-month jump prompted the Atlanta Fed to raise its forecast for second-quarter GDP growth to 2.5% today, up from 2.0% last week.

The Atlanta Fed’s forecast for second-quarter real GDP was updated today with June retail sales data, pushing its real GDP forecast to 2.5% today from 2.0% last week. For the U.S., real GDP growth of 2.5% is well above the long-run average of just under 2%. GDPNow’s measure of real consumer spending growth rose to 2.1% from 1.6%.

CDK hack and lower prices

Sales at new and used car dealerships and parts stores are the largest category of retail sales, accounting for 19% of total retail sales. Sales at 15,000 of these car dealerships were impacted when the ransomware attack on CDK’s cloud-based dealer management system knocked out their computers on June 19 for the remainder of the month, reducing their ability to process vehicle and parts sales in June, leading the largest car dealers to warn of its impact on second-quarter revenue and earnings, and reducing unit vehicle sales in June. Sales not processed in June will be processed in July.

Additionally, dollar sales at auto dealerships (19% of total retail sales) and gasoline stations (7.7% of total retail sales) saw sharp price declines in June, with used vehicle prices in a historic downward spiral that has now reversed 60% of the price surge in 2021 and 2022. Retail sales are not adjusted for price changes. The price declines lowered dollar sales, not unit sales. But lower prices (deflation) for motor vehicles and gasoline boost consumer spending in “real” terms, adjusted for deflation in these items, the opposite of what happened when inflation in these items was high and reduced “real” consumer spending on these items.

Total retail sales

Total retail sales were unchanged in June from May at $704 billion, seasonally adjusted, and rose 2.3% year over year, despite the ransomware hack and broad-based declines in prices for goods, including motor vehicles, electronics, furniture and many other items.

Sales in major retail categories

New and used vehicle dealers and parts stores (19% of total retail sales). Note the 2% month-over-month decline in June, mainly due to 15,000 dealers being unable to process sales after the CDK hack.

The relative stagnation in sales over the past 18 months is due to falling prices. The number of vehicles sold, and therefore unit sales, increased year-on-year throughout the year, for both new and used vehicles:

• Revenue: $131 billion
• Compared to the previous month: -2.0%
• Year-on-year: -2.2%

E-commerce and other “non-store retailers” (17% of total retail trade), includes online retailers, e-commerce operations of physical retailers, and stalls and markets:

• Revenue: $123 billion
• Compared to the previous month: +1.9%
• Over one year: +8.9%

Food and beverage services (restaurants, cafes, bars, etc., 13% of total retail). The chart shows the three-month moving average (3mma). You can see the slowdown at the beginning of the year and the reacceleration in the last three months:

1. Revenue: $95 billion
2. Compared to the previous month: +0.3%
3. Over one year: +4.4%

Food and beverage stores (12% of total retail trade):

• Revenue: $83 billion
• Compared to the previous month: +0.1%
• Over one year: +1.9%

General merchandise stores, without department stores (9% of total retail trade).

• Revenue: $65 billion
• Compared to the previous month: +0.5%
• Compared to the previous month, 3mma: -0.2%
• Over one year: +3.5%

Gas stations (8% of total retail sales). Sales at gas stations are moving almost in line with the price of gasoline, and the price of gasoline has been falling in recent months, leading to a decline in sales in dollars:

• Revenue: $52 billion
• Compared to the previous month: -3.0%
• Compared to the previous month, 3mma: -1.2%
• Over one year: -0.4%

Sales in billions of dollars at gas stations, including other goods sold at gas stations (red axis, left) and gasoline CPI (blue axis, right):

Building materials, garden supplies and equipment stores (6% of total retail trade). The pre-pandemic trend in blue:

• Revenue: $41 billion
• Compared to the previous month: +1.4%
• Compared to the previous month, 3mma: +0.4%
• Year-over-year, 3-month moving average: 5.7%

Clothing and accessories stores (3.7% of retail trade):

• Revenue: $26 billion
• Compared to the previous month: +0.6%
• Compared to the previous month, 3mma: +1.3%
• Over one year: +4.3%

Miscellaneous retail stores (2.2% of total retail): Specialty stores, including cannabis stores.

• Revenue: $15 billion
• Month after month: +0.3%
• Month on month 3mma: -0.9%
• Year-over-year, 3-month moving average: +4.3%

Department stores (Today, it’s down to just 1.5% of total retail sales, down from about 10% in the 1990s.) Online sales by department store chains are not included here, but are included in the online retail sales above. This chart is the embodiment of what we began documenting in our 2016 column, Brick and Mortar Meltdown :

• Revenue: $11 billion
• Compared to the previous month: +0.4%
• Compared to the previous month, 3mma: +0.3%
• Year-over-year, 3-month moving average: -0.6%
• Since the peak in 2001: -43%.

Furniture and home accessories stores (1.6% of total retail trade). A large portion of furniture and home furnishing sales have been transferred to e-commerce. This is what remains at physical retailers specializing in furniture and home furnishing.

• Revenue: $11 billion
• Compared to the previous month: +0.6%
• Compared to the previous month, 3mma: +1.0%
• Over one year, 3mma: -4.4%.

Original article

Editor’s Note: The summary bullet points in this article were selected by Seeking Alpha editors.