Retail sales data for the world’s largest economy matched estimates in figures released Thursday by the Commerce Department.
The 0.2% headline gain for June marked a sharp deceleration from the prior month’s (upwardly revised) 1% advance, but remember: This is nominal spending. Gas station receipts fell more than 5% in June.
Excluding gas stations, sales rose 0.7% last month. Stripping out car dealers too, the gain was 0.4%.
As the figure shows, the control group print — i.e., what counts for GDP forecasting — was a solid 0.5%, in line with consensus.
Seven of 13 categories showed a gain. One (furniture stores) was unchanged. Food services and drinking places, the only services sector category in the report, managed just the smallest of advances (0.1%). Nonstore sales rose nearly 2%. (That’s Prime Day.)
Bottom line: This was a mixed report on some vectors, but the control group’s what really matters. As BMO’s Ian Lyngen noted, the three-month average annualized pace of control group sales is 9.2%, down from 9.7% in May, but up from 5.9% at the end of Q1.
The 0.5% advance on that metric for June “leav[es] well intact the prevailing perception that US consumers remain on strong footing,” he said.
Buy Now, Pay Later (BNPL) in the U.S. has boomed in the last five years. Total transaction volume grew roughly 20% per year since 2021. Total U.S. purchase volume is expected to top $122 billion annually. Over 37% of U.S. consumers have used the service recently.
I have yet to utilize any BNPL scheme, and I’m intentionally using the nefarious term scheme here, but isn’t it just more unsecured credit — the same old revolving credit wolf in sheep’s clothing? While the “interest-free” component gets all the marketing and attention, seems to me these schemes have service or other administrative “convenience” fees attached which effectively substitute for the interest cost. If so, BNPL seems to represent the most subprime of revolving debt, that only borrowers without access (or available credit) to “less subprime” revolvers might utilize (and feel marginally better about since they can rationalize that it’s interest-“free”).
I’ve used BNPL plenty of times. Not because I need to, but because it’s a 0% loan when I can make > 0% on the cash in a money market fund. It’s amazing how frictionless the process has become. Basically 5 clicks to use it, then maybe 10 more clicks to set up auto-pay. If there are any fees (and I’m sure there are, they’re not providing this service for free), they’re covered by the seller. If someone wants to let me keep the $2,500 for my new treadmill in an interest bearing account for two years, I’m not going to stand in their way.
I did the 0% interest and no fee offer for my HVAC system replacement. I was surprised they let me do that but I didn’t argue.
Sure — this is like running huge purchases on your credit card to earn miles/rewards/cash back, then just paying the credit card. But that’s people with savings and/or discretionary income to play the game. I suspect for most BNPL people, they aren’t playing the game as much as it’s the only game left for them. I haven’t looked into it myself, but have seen coverage that, on average, BNPL users have significantly lower credit scores and that prime borrowers, like you, use BNPLs for strategic reasons but account for a relatively small share of the BNPL pie.