Grocery store sales flatten out in June

Amid falling inflation, grocery store sales edged up year over year in June but dipped from the previous month, in line with virtually flat results for core U.S. retail sales.

June retail and foodservice sales rose 0.2% to $689.5 billion (seasonally adjusted) from $688.16 billion in updated figures for May and were up 1.5% from revised data for June 2022, the U.S. Census Bureau reported in advance estimates released Tuesday.

Retail trade sales—excluding motor vehicles, parts stores, gas stations and repair shops—nearly plateaued in June, inching up 0.2% month over month to $600.55 billion (seasonally adjusted) and rising 0.5% on a yearly basis.

The June performance compared with gains of 0.5% monthly and 2% annually for May retail and foodservice sales and 0.4% monthly and 0.9% year over year for May retail trade sales.

Sales at grocery stores declined 0.7% to $72.91 billion (seasonally adjusted) in June from $73.41 billion in updated numbers for May, when sales were down 0.2% sequentially, according to the Census Bureau. June grocery retail sales grew 1.1% from a year ago versus a 2.7% annual gain in May.

June sales at all food and beverage stores also fell 0.7% monthly, to $81.23 billion, but climbed 1.3% over 12 months. The Census Bureau’s revised data for May showed flat results month to month and a 2.9% increase year over year.

“June’s 0.2% gain in retail sales reflects positive momentum on inflation,” Claire Tassin, retail and e-commerce analyst at data intelligence firm Morning Consult, said in an email. “Consumer concern about inflation hit its lowest point since Morning Consult began tracking last year: 47% of Americans said they’re very concerned about inflation versus 64% a year ago. Today’s report shows some positive movement in home furnishings and electronics after months of consumers deferring large discretionary purchases.”

Inflation’s downward trend continued in June. The Consumer Price Index (CPI) rose 3% (unadjusted) over 12 months, less than the 4% annual uptick in May, the U.S. Bureau of Labor Statistics (BLS) reported last week. That marked a year’s worth of monthly annual decreases. On a sequential basis, the June CPI was up 0.2% (seasonally adjusted) versus a 0.1% increase in May.

Grocery price inflation followed a similar trend. Month to month, the food-at-home index came in flat for June after a 0.1% uptick in May decreases of 0.2% in April and 0.3% in March. Annually, the food-at-home CPI was up 4.7% in June, continuing steady decreases from 5.8% in May, 7.1% in April and 8.4% in March.

“Retail sales rising for the third consecutive month reflects resilience for American consumers, despite high interest rates and economic uncertainty. Categories like furniture, electronics, clothing stores and food and drinking places all saw growth,” commented Naveen Jaggi, president of retail advisory services at commercial real estate firm Jones Lang LaSalle (JLL). “Very few sectors saw a decline in sales—gasoline stations, grocery stores, department stores, and building and garden materials. The 22% year-over-year decline in gasoline stations shows consumers were spending elsewhere. The most notable increase happened in electronics, a 1.1% increase from last month.”

NRF: Consumers show “willingness to spend”

The National Retail Federation (NRF) on Tuesday reported a 0.4% monthly gain (seasonally adjusted) and 3.3% annual growth (unadjusted) for June retail sales, compared with increases of 0.4% monthly and a 4.4% over 12 months for May.

NRF’s estimate focuses on core retail, excluding automobile dealers, gas stations and restaurants. First-half 2023 retail sales (unadjusted) rose 4% year over year, including a 3.1% gain on a three-month moving average through June, the retail trade group said.

“The pace of spending is slower, but consumers are still in control of the direction of the economy, thanks to the still-growing labor market and a comfortable cushion of savings,” NRF Chief Economist Jack Kleinhenz said in a statement. “Jobs aren’t growing as fast as they were, but employment is by no means in a slump. And if consumers have jobs, they have the willingness to spend. On average, consumer balance sheets remain sturdy, and they have the wherewithal to support spending for most of the rest of the year. That’s thanks, in part, to excess savings built up during the pandemic, along with easing inflation.”

Source: National Retail Federation

On a monthly basis, June retail sales climbed in five of nine retail categories tracked by NRF: online stores, health and personal care stores (including drug stores), electronics and appliance stores, apparel and accessories stores, and furniture and home furnishings stores. Increases ranged from 0.1% to 1.9%. The remaining categories—grocery and beverage stores, general merchandise stores, sporting goods stores, and building materials and garden supply stores—saw sequential decreases of 0.1% to 1.2% for June.

Six retail segments posted 12-month sales increases in June, including grocery and beverage stores, health and personal care stores (including drug stores), general merchandise stores, online stores, electronics and appliance stores, and apparel and accessories stores, with gains ranging from 1.3% to 9.9%. Yearly declines were seen in sporting goods stores (-0.9%), furniture and home furnishing stores (-3.6%) and building materials and garden supply stores (-3.7%).

Grocery and beverage stores sales fell 0.7% month to month seasonally adjusted in June and rose 1.3% unadjusted annually, NRF said. Among other retail categories in the food, drug and mass channel, June sales inched up 0.1% month over month seasonally adjusted and grew 6.6% unadjusted year over year for health and personal care stores (including drug stores), while general merchandise stores recorded a 0.1% dip month over month seasonally adjusted but a 1.4% increase unadjusted year over year.

“June retail sales confirm that while the economy may be cooling, consumers remain on solid footing and are spending on household priorities,” NRF President and CEO Matthew Shay stated.

Bullish outlook for back-to-school retail sales

In reporting June retail sales, Shay reiterated NRF’s forecast of record sales for the back-to-school retail selling season. The retail trade group, which released results of its annual back-to-class survey late last week, projected 2023 back-to-school spending of $41.5 billion, up from $36.9 billion last year and the previous peak of $37.1 billion in 2021. Back-to-college spending is pegged at $94 billion for 2023, well over last year’s record of $74 billion.

Source: JLL 2023 Back to School Shopping Report

“Back-to-class spending is one of the most important shopping occasions of the year, and NRF’s consumer research shows that back-to-school and college spending is expected to set new records. Consumers are looking for the best value and deals, and retailers are well stocked with essential items for families and students.”

Families with children in grades K-12 are expected to spend an average of $890.07 on back-to-school items this year, about $25 more than last year’s record of $864.35, NRF said. College students and their families stand to spend an average of $1,366.95 per person, up from $1,199.43 last year and topping the previous record of $1,200.32 in 2021. NRF noted that back-to-college spending has almost doubled since 2019.

The June retail sales results provided somewhat of a prelude to the back-to-school shopping season, according to JLL’s Jaggi.

“With traffic relatively healthy, inflation growth softening and consecutive months of growing sales, it was expected to have moderate retail sales growth in June, particularly as we start the back-to-school shopping season,” he explained.

JLL’s 2023 Back-to-School Shopping Report found that more than 60% of parents planned to begin school season purchases before July. So June retail sales were expected to get a lift—namely in categories like electronics and apparel—though August remains the most popular month for back-to-school shopping, Jaggi noted. Of over 1,000 parents surveyed, 55.2% plan to more on back-to-school items this year, with their dollar tally for purchases at about 15.7% more, well over the year-over-year inflation rate of less than 5%. Those expecting to spend more mainly cited higher prices (27.7%), but other reasons included more kids in school this year (11.9%), more big-ticket item needs (11.5%) and an improved financial picture (4.1%).