The U.S. retail market performed better than expected last month. Retail sales rose by a total of 0.6% in June, with gains in certain product categories supplementing pretty significant losses in others. As consumers continue to return to their pre-pandemic spending habits, the economy is showing signs of major growth—but what will that mean for mattress retail?
This uptick in sales came as a surprise to many economists, many of whom had forecasted a roughly 0.3% decline in sales following May’s 1.7% drop. But, in fact, June sales not only outpaced economist expectations, they continued a significant return to pre-pandemic levels as well. These June numbers represented a 18% increase in sales when compared to June of last year—while sales from April to June experienced a 31.5% increase from the same period last year.
“Many retailers are benefiting from increased traffic in stores as well as higher prices for items on the shelves, a much-needed bounce back for many service sector businesses,” Ben Ayers, senior economist at Nationwide, told CNBC recently.
Most notably, electronics and appliance stores logged a 3.3% increase in June, while department store sales jumped by 5.9%. But it wasn’t gains across the board. While there has been plenty of talk about the struggling automotive sector, which declined by 2% in June thanks to an ongoing supply chain issue—the furniture and home furnishings segment actually logged even more significant losses with a 3.6% decline.
In some ways, this tracks with economists’ post-pandemic expectations. With at least 160 million Americans now fully immunized against COVID-19 and more pre-pandemic services and activities once again available, many consumers are feeling comfortable spending in areas they had largely avoided during the height of the pandemic. In fact, many of the categories that saw the biggest increases in June were those that struggled the most during the pandemic, continuing a steady rebound they have been experiencing throughout all of 2021. Conversely, the categories that declined in June were those that had thrived during the pandemic—including home furnishings and furniture.
"The great spending rotation saw households cut back on furniture, autos, sporting equipment and building material – categories that outperformed during the pandemic – while spending more freely at restaurants and bars, gas stations and electronic stores," Gregory Daco of Oxford Economics explained in a Friday analysis."While future retail sales readings may give the impression of hesitant consumers, they shouldn’t be viewed as a sign of wary households but rather a sign that vaccinated consumers are rotating their spending into services.”
Though this may sound like bad news to bedding brands and retailers, economists regard it as a sign of a steady consumer. “Consumers and the economy are doing well,” explained Ted Rossman, senior industry analyst at CreditCards.com. “While retail sales have leveled off since March, they’ve plateaued at a high level. And they’ve done it without stimulus these past three months.”
In fact, some experts have high hopes for the rest of 2021’s economic outlook. Over the course of the pandemic, households in the U.S. accumulated at least $2.5 trillion in excess savings. This surplus is expected to continue to boost spending through the rest of this year and beyond. For people with children, the expanded Child Tax Credit program delivered a much welcomed boost—and will hopefully help offset some of the losses caused by early termination of the supplemental unemployment benefits in the coming months. As a whole, some experts are predicting that the economy could grow by at least 7% this year, which would be the fastest growth since 1984. And a strong economy is a good sign for all retailers.
One category that may benefit the most from this new economic landscape? The luxury market. A strong stock market and rising home prices has further strengthened the financial stability for a lot of already wealthy people—while many middle income people have gotten a financial boost through stimulus payments and student loan suspension. Even more so, the luxury category has had a somewhat unique rebrand, thanks to a growing interest in sustainability. “As purchasing luxury goods itself can be experiential for many shoppers, trading up and practicing a buy-less, buy-better form of sustainability takes the place of ‘experiences,’” Marie Driscoll, managing director of Luxury and Fashion at Coresight Research, recently explained to Forbes.
The retail sales data and forecasting is clear: consumers have money to spend. But with that, the necessary messaging becomes: why should they spend it with you?