Consumer Spending Falters as Economic Momentum Wanes; Retail Sales Remain Well Ahead of Last Year

July 18, 2012

  • Consumers’ contribution to economic growth shows signs of slowing as retail sales dipped for the third consecutive month, a surprising trend that has not occurred in nearly four years. Core retail sales remain at healthy levels, 8 percent higher than their pre-recession peak, but the pattern of monthly declines implies a growing hesitancy on the part of consumers and correspondingly lower confidence. Consumer confidence fell three points in July, on the heels of a 6.5 point plunge in June, to the lowest level recorded this year. In addition, the cooling labor market and slower wage gains reflect a corporate bias toward caution in response to lower growth expectations and uncertainty.
  • June retail sales totaled $401.5 billion, representing a 0.5 percent monthly decline from May, but they remain 3.8 percent above year-ago levels. Core retail sales, which excludes the highly volatile auto and gasoline segments, declined by 0.2 percent for the month, but also exceeded last year’s figures by 3.5 percent. Nonstore retailers, dominated by online stores, represented a bright spot, achieving 0.5 percent growth over the last month. Food and beverage stores, and clothing and accessories stores also garnered modest monthly gains in June. All other categories posted declines for the month. Led by building materials and supplies, and the sporting goods, music and bookstore category, both of which declined 1.6 percent. Despite the downward monthly trend, most retail components remain at least 5 percent ahead of last year, with only department stores and electronics and appliance stores reporting annual revenue declines of 3.2 and 1.0 percent, respectively.
  • The loss of momentum in the labor markets, flattening trajectory of wage growth, and economic and political uncertainty appears to have ushered in the second quarter’s downward trend in consumer spending. Although energy prices fell 4.6 percent in May, boosting disposable income, expenditures weakened as consumers increased the personal savings rate by 3.9 percent instead. Wages and salaries, which account for more than half of income, flattened in May following a substantial increase in April.

Impact on Commercial Real Estate

  • The downturn in several economic indicators that influence demand for industrial properties, such as retail sales and production, could eventually constrain demand for industrial space. Thus far, however, the sector has maintained good momentum with dwindling vacancy aided by low levels of new supply. Vacancy is forecast to tighten to 11 percent by year end. Looking forward, pending legislation with bi-partisan support that allows states to tax online retailers would effectively eliminate ecommerce site’s 5 to 10 percent pricing advantage over brick-and-mortar retailers. Consumers would absorb higher prices, but the tax would contribute significant revenues to state coffers. To regain a competitive advantage, Amazon, and likely its online rivals, plans to offer same-day delivery, which requires more strategically located warehouses across the country.
  • The downsized formats, renovations, and selective openings and closings by department stores struggling to remain relevant are indicative of the annualized declines in department store receipts. Net new demand for retail space remains limited, but the decline in the national vacancy rate owes more to the dearth of new supply, expected to total 32 million square feet by year end. Forward projections call for a further decline in vacancy to 9.2 percent by year end.

The Research Brief blog from Marcus & Millichap offers timely insight and expertise into the rapidly changing investment real estate industry. The Research Brief is published weekly by top industry professionals, showcasing time-sensitive information and valuable analysis. Add the Research Brief blog to your reading list today.

Follow Marcus & Millichap Research Services on Twitter!

The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.


  1. Posted December 28, 2012 at 7:23 pm | Permalink | Reply

    I like the helpful info you provide in your articles. I will bookmark your weblog and
    check again here frequently. I’m quite sure I will learn many new stuff right here! Best of luck for the next!

  2. Posted December 30, 2012 at 9:36 am | Permalink | Reply

    Great site. Lots of helpful info here. I am
    sending it to several pals ans also sharing in delicious.
    And naturally, thanks for your sweat!

  3. Posted January 1, 2013 at 4:09 am | Permalink | Reply

    You ought to take part in a contest for one of the greatest sites on
    the internet. I’m going to recommend this blog!

  4. Posted January 11, 2013 at 5:33 am | Permalink | Reply

    You honestly have a point there, I have never analyzed it
    like it like that before. You make it sound so alluring.
    I am going to have to inquire about this more!

  5. Posted January 14, 2013 at 3:51 pm | Permalink | Reply

    Excellent post. I am experiencing many of these issues as well.

  6. Posted January 18, 2013 at 3:31 am | Permalink | Reply

    I’d like to thank you for the efforts you have put in writing this site. I’m hoping to check out the same high-grade content from you later on as well.
    In truth, your creative writing abilities has inspired me to get my own, personal blog now

  7. Posted February 14, 2013 at 6:00 am | Permalink | Reply

    I’m psyched to see a new update, I was going through irrational distress! I have a ball reading your stuff, I can’t get enough of it!

  8. Posted February 20, 2013 at 12:48 am | Permalink | Reply

    True, but entertaining, as are many of your pages. I read through the archives over the past week, and I must say I think I’m in love.

  9. Posted April 15, 2013 at 10:43 am | Permalink | Reply

    Hello There. I found your weblog the use of msn. That is a very smartly written article.
    I will make sure to bookmark it and return to learn extra of your useful information.
    Thank you for the post. I’ll certainly return.

  10. Posted May 12, 2013 at 3:27 pm | Permalink | Reply

    Hi mates, pleasant paragraph and good urging commented here, I am actually enjoying by these.

  11. Posted May 25, 2013 at 12:37 am | Permalink | Reply

    Thank you for every other informative site. Where else may I am getting that type
    of information written in such a perfect way? I’ve a project that I’m
    just now working on, and I have been on the look out for such

  12. Posted June 25, 2013 at 7:54 pm | Permalink | Reply

    I constantly spent my half an hour to read this blog’s articles or reviews daily along with a mug of coffee.

  13. whatsapp for pc windows
    Posted July 7, 2013 at 6:59 pm | Permalink | Reply

    Excellent blog here! Also your website loads up fast!
    What host are you using? Can I get your affiliate link to your host?
    I wish my site loaded up as quickly as yours lol

  14. Posted July 8, 2013 at 9:32 am | Permalink | Reply

    Your style is very unique in comparison to other people I have read
    stuff from. Thanks for posting when you have the
    opportunity, Guess I’ll just book mark this site.

  15. Posted July 8, 2013 at 4:34 pm | Permalink | Reply

    I was wondering if you ever considered changing the layout of
    your blog? Its very well written; I love what youve got to say.
    But maybe you could a little more in the way of content so people could
    connect with it better. Youve got an awful
    lot of text for only having one or 2 pictures. Maybe you could space it
    out better?

  16. Posted September 17, 2013 at 12:55 am | Permalink | Reply

    Hi! Someone in my Facebook group shared this site with us so I came to take a look.
    I’m definitely loving the information. I’m book-marking and will
    be tweeting this to my followers! Fantastic blog and excellent design.

  17. Posted September 24, 2013 at 2:32 am | Permalink | Reply

    Your method of telling everything in this piece of writing
    is genuinely fastidious, all be able to without difficulty be aware
    of it, Thanks a lot.

  18. Posted October 7, 2013 at 12:19 pm | Permalink | Reply

    Hi, I desire to subscribe for this website to take most up-to-date updates, so where can i do it please assist.

Post a Comment

Required fields are marked *


%d bloggers like this: