By Harriet Torry 

U.S. retail sales increased 7.5% in June as stores and restaurants reopened and consumers bought big-ticket items and resumed clothing purchases, but a recent rise in virus cases could again dampen spending.

The Commerce Department on Thursday said the June increase in retail sales -- a measure of purchases at stores, at restaurants and online -- totaled $524.3 billion, up from $487.7 billion in May and nearly back to pre-pandemic levels. The total was driven by a pickup in sales at motor vehicle dealers, furniture, clothing and electronic stores.

Spending on gasoline increased 15.3% from the prior month as commuters got back on the roads. Sales at bars and restaurants jumped 20% from May, while online spending decreased 2.4% last month and sales at grocery stores dropped 1.6%.

The Labor Department separately said new unemployment claims by laid-off workers decreased by a seasonally adjusted 10,000 to 1.3 million for the week ended July 11, extending a trend of gradual declines from a peak of 6.9 million in late March.

Higher retail sales comes on the heels of lockdowns to contain the pandemic during the spring that triggered an economic shock and record declines in retail sales and other business activity. Government stimulus, such as enhanced unemployment insurance for laid-off workers, and virus-induced shifts in spending patterns have helped propel the rebound.

Marshal Cohen, chief industry adviser at the NPD Group, Inc., a market research firm, said lower spending on experiences such as concerts and summer camp due to the pandemic has put more money in consumers' pockets to spend on tangible items, such as televisions and gym equipment, helping drive retail-sales gains.

Still, economists say a recent surge in coronavirus cases could again put the brakes on retail spending, as states pause or reverse reopening plans for indoor dining, movie theaters and other activities.

Efforts by states to reopen their economies in May and June eased lockdown restrictions that had choked off retail, dining and other spending, and have allowed millions of people to go back to work. Despite the gains, retail spending remained below pre-pandemic levels, totaling $485.5 billion in May compared with $527.3 billion in February.

John Washburn, owner of three furniture stores in central Florida that also sell food and drink, said business has been slow since he reopened dine-in service at two of the three spaces last week after temporarily closing them in late June, when cases started rising in Florida.

He said furniture sales are taking up slack for the overall business concept, which lets patrons use the stores' furniture while sipping a glass of wine or snacking. Without the furniture revenue, Mr. Washburn said, "it certainly would be a lot more difficult to keep [the restaurants] alive."

He added it has been hard to plan ahead amid uncertainty about virus risks and state operating rules, but added: "We can move quickly. If we have to close, we have to close."

Mark Cohen, director of retail studies at Columbia University's Graduate School of Business, said the ebb and flow of the pandemic continues to weigh heavily on retailers.

"On top of the health crisis, which is obviously completely unstable, there's the economic catalyst that's going to become ever more evident when unemployment insurance ends," he said, referring to the extra $600 a week in enhanced unemployment benefits that jobless Americans are scheduled to stop receiving on July 31.

Consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of economic output, and retail sales account for about a quarter of all consumer spending. Social distancing, lockdowns and travel restrictions cut off spending earlier in the pandemic, while pent-up demand boosted retail sales as states began to reopen in May.

"This is going to be, you know, a roller coaster," PepsiCo Inc. Chief Executive Ramon Laguarta said in a call with analysts Monday. The company posted flat revenue for the latest quarter as increased demand for its snacks and packaged foods largely offset a decline in beverage sales.

PepsiCo's second quarter ended June 13 -- when states were lifting coronavirus restrictions ahead of the recent surge in Florida, Texas and other states.

Allan Schilter, a retired accountant in Springfield, Mo., said he and his wife remain cautious.

"I don't see us getting back into the economy real fast," he said. "We want to feel safe." Mr. Schilter, who said he is in his early 80s, estimated they could have spent $23,000 on three planned trips canceled due to the pandemic, including a cruise to Italy.

"That's a lot of money out of the economy right there, plus entertainment and dining out in our hometown," he said.

Data from the restaurant-reservation website OpenTable showed that growth nationally in the number of seated diners recently stalled, after rising steadily in May and June.

Linda Bradley of Lombard, Ill., has been spending less on commuting expenses but more on restaurant delivery during the pandemic. Her employer -- a mapping and location-data company -- cut her salary 5%, but she said her experience in the pandemic hasn't been as bad as during the 2007-2009 recession, when she was laid off.

"Things are actually going OK. I personally feel that I'm going to be just fine," said Ms. Bradley, who is 60.

Ms. Bradley and her husband have a long-planned trip to Hawaii in October. "We're still hopeful that we're going to be able to go to Hawaii but with these resurgences, who knows?"

--Kim Mackrael contributed to this article.

Write to Harriet Torry at harriet.torry@wsj.com

 

(END) Dow Jones Newswires

July 16, 2020 09:10 ET (13:10 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.