NRF: Inflation Does Not Damper Retail Sales

Consumers are prioritizing essentials such as food, energy and back-to-school products.
c-store shopping basket

WASHINGTON, D.C. — Despite rising inflation that pushed prices up across the board in June, retail sales increased last month, according to the National Retail Federation (NRF).

"June retail sales data shows that consumers remain on solid footing despite rising prices and an active Fed raising interest rates to combat it," NRF President and CEO Matthew Shay said. "Inflation has consumers modifying their spending behavior and prioritizing essentials like food, energy and back-to-school items.

"Unfortunately, modified consumer behavior won't be sufficient to offset persistent price increases," he continued. "Other policy measures like removing China tariffs, enacting smart immigration reforms and investing in supply chain resiliency are needed to lower costs for American families and put much-needed dollars back into their pockets."

Numbers indicate that consumers powered through price pressures in June, but inflation is eating away at the savings they built up during the pandemic and is wiping out recent income games, according to NRF Chief Economist Jack Kleinhenz.

"Inflation remains a challenge to consumers trying to make ends meet and will continue to be an issue even if it cools down in the months ahead," he said. "Despite that, consumers are holding up notably well and continuing to spend."

The U.S. Census Bureau reported on July 15 that overall retail sales in June were up 1 percent seasonally adjusted from May and up 8.4 percent on the year, compared to a 0.1-percent month-over-month decrease and an 8.2-percent year-over-year increase in May.

NRF's calculation of retail sales show June up 0.6 percent from May and up 5.8 percent unadjusted year over year. Sales in May were down 0.3 percent month over month but up 6.3 percent year over year. Additionally, NRF found that numbers were up 5.8 percent unadjusted year over year on a three-month moving average as of June. Sales were up 7 percent year over year for the first six months of 2022.

On a yearly basis, June sales were up in all but two retail categories, led by online sales, grocery stores and building materials stores, and increased in just over half of categories on a monthly basis.

NRF excludes car dealers, gas stations and restaurants to focus on core retail.

Earlier this month, the latest Consumer Price Index report from the U.S. Department of Labor found that consumer prices overall jumped 9.1 percent in June from a year earlier. Much of the rise came from gasoline prices, which increased 11.2 percent for the month and just shy of 60 percent year over year. The "Food at Home" category increased 12.2 percent from the same time last year.

However, despite a slowing down of the U.S. economy, NRF reported that talks about a recession may be premature. Kleinhenz noted that consumers remain financially healthy, and the nation is unlikely to enter into a recession during the remainder of 2022.

"I am not betting on an official recession in the near term, but the most recent research pegs the risk over the next year as about one in three and it will be touch and go in 2023," Kleinhenz said. "In the meantime, a contracting economy short of a recession is not out of the question."

The impact is being particularly strongly felt felt in grocery store aisles, as the latest data from Datasembly's Grocery Price Index found that across the United States baking goods rose 7.6 percent, snacks such as cookies and chips increased 7.5 percent, and dairy and eggs were up 6.9 percent.

Based in Washington, D.C., NRF is the world's largest retail trade association. Retail is the nation's largest private-sector employer, contributing $3.9 trillion to annual gross domestic product and supporting one in four U.S. jobs.