Consumer Sentiment rose again in June, with gains attributed to the continued slowdown in inflation along with stability in labor markets. Unemployment remains below 4% at 3.6% and the Consumer Price Index increased 3.0%. Retail gas prices remain stable, down 23% YOY at $3.66 per gallon nationally through early July vs. $4.75 last year and personal disposable income rose 8.0%, with consumer expenditures increasing.
June retail sales (excl. motor vehicles and gas stations) increased 3.9% over 2022 – but several key segments (sporting goods, building materials, garden, electronics, and department stores) showed declining sales or remained flat year-over-year. While we are in the heat of summer with consumers shopping for Back-to-School, we anticipate a robust bump in sales in the short term, as most of these product categories need to be replaced YOY as either out-used or out-grown.
Longer term, we see potential challenges due largely to the heavy weight of consumer debt that continues to climb, which could squeeze shoppers to limit spending to essentials like food and health & beauty, pushing off other necessities and durable goods. A key concern for retailers in the back end of 2023 is the fresh arrivals of inventory planned for the second half and how deep promotions will need to be to sell through the merchandise.
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