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July Retail Sales Report Will Show Delta Variant’s Impact on Spending

July Retail Sales Report Will Show Delta Variant’s Impact on Spending

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The Commerce Department is set to report retail sales on Tuesday, and economists expect that spending dipped in July. Many cities and states in the U.S. were forced to rethink reopening plans last month as coronavirus cases rose, driven by the Delta variant, while the rate of vaccinations slowed.

“We’re seeing caution around the board where people are trying to minimize any potential exposure to the Delta variant,” said Joseph Song, a senior U.S. economist at Bank of America.

The unsteady reopening of the economy has been causing sales to shift month to month. After a drop in May, spending increased by 0.6 percent in June. However, spending on cars, car parts, building materials, furniture and sporting goods declined despite the rise in overall sales.

A global shortage of computer chips has slowed down car and truck production in recent months, with companies like Ford, Daimler and BMW feeling the effects on their financial performance.

The shortage continues to weigh down the automotive industry despite the rise in consumer prices, which increased by 5.4 percent last month compared with a year earlier, the Labor Department’s Consumer Price Index showed on Wednesday.

The report could also show a drop in e-commerce sales.

“One of the main reasons for July’s weakness was due to a slowdown in online retail sales (card not present), which we believe owes in large part to the timing of Prime Day promotions this year,” Michelle Meyer, an economist at Bank of America, wrote in a note on Friday. Prime Day, usually held on July, took place in mid-June.

A decline in sales could signal a slowdown in the broader economic recovery in August. Consumer sentiment tumbled more than 13 percent in early August from July, according to preliminary results from the University of Michigan’s consumer sentiment index.

A string of financial reports from retail giants will be announced this week. Walmart and Home Depot report on Tuesday, with Macy’s, Kohl’s and Target following later in the week. The results could give more perspective on the Delta variant’s effect on consumer spending.

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