Dipping Sales Not Enough to Dampen Economy

July 15, 2004
The U.S. Dept. of Commerce said yesterday retail and food service sales for June, seasonally adjusted, fell 1.1% from the month before. The figure is an advance estimate and subject to a 0.8% margin of error. Retail sales play a huge factor in the market because according to an article The Wall Street Journal Online posted July 15, the numbers account for approximately two-thirds of the economy. They

The U.S. Dept. of Commerce said yesterday retail and food service sales for June, seasonally adjusted, fell 1.1% from the month before. The figure is an advance estimate and subject to a 0.8% margin of error.

Retail sales play a huge factor in the market because according to an article The Wall Street Journal Online posted July 15, the numbers account for approximately two-thirds of the economy. They also keep inventories low, which stimulates truck traffic.

Motor vehicle and parts sales took the largest hit, down 4.3% from the previous month. If motor vehicle and parts sales are excluded, the retail sales hit drops to only 0.2%. Furniture sales saw the largest increase, up 1.1%. Consumers spent 0.5% more on electronics and 0.6% more on sporting goods. Department stores sales dropped 0.8%, clothing dropped 0.5%, and sales at gas stations dropped 0.9%.

Separately, the U.S. Census Bureau said today that the combined value of distributive trade sales and manufacturer’s shipments for May seasonally adjusted is estimated at $937.6 billion— a 0.7% increase. Manufacturers’ and trade inventories seasonally adjusted increased 0.4% to $1.2 trillion. That brings the inventory-to-sales ratio for May to 1.30

Despite the retail sales dip recorded in June, president of Commercial Motor Vehicle Consulting Chris Brady told Fleet Owner that the outlook for freight throughout the remainder of 2004 is strong, pointing to favorable indicators in the inventory-to-sales ratio.

“The inventory-to-sales report implies that inventories are very, very lean throughout the supply chain,” Brady said. “Once something comes off the shelf, retailers will have to reorder. I think that the second half of the year will be strong for freight.”

The June retail sales figures may be an isolated decline, he added. “I wouldn’t bet on a pullback on consumer spending based on one month— particularly since employment is on the rise and there will be more income.” In May, retail sales increased 1.4% over the previous month.

In another report, the Federal Reserve said today that industrial production decreased 0.3% in June, after rising 0.9% in May. Manufacturing output decreased 0.1% for the month, but posted an overall jump of 7.1% (annual rate) for the second quarter.

“The 7.1% increase is incredible— that’s a very strong number,” Brady said. “The 7.1% rate is unsustainable. People make it sound like the economy is slowing down but that’s not the case. The second half of the year growth is still going to be very good.”

About the Author

Terrence Nguyen

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