On Friday, the Commerce Department reported U.S. retail sales unexpectedly rose in June, rebounding 0.6% compared to the 0.3% drop estimated. Yahoo Finance’s Emily McCormick breaks down the report.

Video Transcript

MYLES UDLAND: First, let's start with this morning's economic data. Retail sales for the month of June coming in far stronger than expected. Yahoo Finance's Emily McCormick joins us now with the details on this report. Emily.

EMILY MCCORMICK: Well, Myles, retail sales unexpectedly increased in June as Americans spent more on clothing, electronics, and dining out. And we saw the total value of retail sales in the US rise by 0.6% in June compared to May. Consensus economists were looking for a 0.3% monthly drop. So this definitely was an upside surprise. But at the same time, we did see a downward revision to retail sales in May. Those were down by 1.7%, which was updated from the 1.3% monthly drop that was reported previously.

But taking a look at what drove that increase in June, big contributions from categories that have to do with going back out and the reopening up, more broadly. And we saw department store sales were up 5.9% and actually outpaced the gain in non-store retailers or e-commerce platforms during the month. We also saw clothing store sales up 2.6%. Food services and drinking places saw sales rise by 2.3%. And we also saw a 2 and 1/2% increase in gas station sales.

Now that said, there were some declines that dragged down that overall headline number. Notably, we did see motor vehicle and parts dealer sales fall for a back-to-back month, this time down by 2%. And furniture and home furnishing store sales were down 3.6%. So clearly, people not redecorating their homes as much now that they are back to going out and going back into the office. But overall, again, retail sales up 26% in June month on month and still up a solid 18% year on year. Guys.

MYLES UDLAND: All right, Yahoo Finance's Emily McCormick with the latest on that June retail sales data coming on the back of an interesting week for economic data. Of course, the inflation report we got earlier this week really the highlight. When I saw these numbers, Brian Sozzi, I had to think of you first. Clothing and clothing accessories store sales for the three months, April through June, up 163% over the same three-month period last year. Obviously, pandemic effects, but it is part of a story that you have been on for some time, that the clothing companies are telling us people are stocking up as they re-enter the world, even with, obviously, the base effects flattering that number.

BRIAN SOZZI: Yeah, look, we just had Levi's earnings out a couple of days ago. They are telling you that they're practically selling almost everything they're making. And they're also doing it at a higher price. I've seen it in the malls that I've went to. I mean, you have packed malls on the weekend. You have a lot of out of stocks in those return to work categories. Men's suits, for example. Men's shirts out of stock online and in stores.

I would also call attention to this, too, with the retail sales report-- strength in electronics and also health and personal care products. So if you're trading today, you're on the Yahoo Finance platform, often numbers like this, you want to take a look at a Best Buy. Certainly, I think within the numbers, you have seen probably people getting prepared to go back to college and go back to elementary school, per se, let's say, in September when that starts to open back up.

Health and personal care products, you're going to want to look to Ulta. You've seen makeup sales start to gain ground over the past month. And now that data, usually provided by Nielsen, is getting confirmed by the government data today.

JULIE HYMAN: You know, what's interesting to me about this whole trend of seeing some of these retail sales really strong, you guys, is that last year and coming into early this year, there seemed to be this perception that we were going to see this huge shift from the goods economy back to the services economy, which was the norm really before the pandemic, right? And that shift has not really progressed, like we would have expected, because a lot of services require goods.

In other words, if you're going back out to eat, if you're going on vacation, you want-- if you're going back to the office, as we've discussed many times, and you look at your closet, you don't like anything in there. Maybe your body has changed over the course of the pandemic. And you need new clothing. And I think that even though that's well appreciated now, that's not something necessarily that we would have thought about as much six months ago and that was really baked in. So it's just kind of interesting how that is evolving and developing over time.

MYLES UDLAND: You know, a couple other things in here that stand out is that we can clearly see the sectors where these supply problems are preventing consumers from spending as much money as they'd like. I mean, I know it's stripped out of the core retail number, but motor vehicle and parts dealers, those sales were down 2% last month, compared to May. They're down 2% because there's not enough stuff in the location for people to buy. There are not enough cars on the lot, for instance, for those sales to actually increase month on month.

As Emily mentioned, non-store-- we're also seeing their furniture sales down 3%. As Emily mentioned as well, you know, non-store retailers over the last three months, when compared to the first three months of this year, so you can kind of follow this three-month versus three-month, e-commerce, so non-store retailers, those are up 1.4%, those sales, over that period. But clothing stores up about 14% over that period. Department store sales up 9% over that period.

So we continue to see, you know, this goods economy-- and those are basically places you're buying goods-- this goods economy both outpace some of those online trends and also run into a number of supply problems. And I think as we track inflationary pressures and we track all these logistics shortcomings, we are starting to see it show up. And in the data, it does reach a limit.

And I know that Jay Powell doesn't even want to talk about transitory pressures anymore. Didn't even say it over the last couple of days. But there is clearly a limit at which you can no longer just have prices and the sale of stuff go up forever. And we're starting to see that in some of these categories, a different way, perhaps, to look at this trend through the retail sales data.

JULIE HYMAN: Just one more--

MYLES UDLAND: All right, let's switch gears to-- yes, go ahead.

JULIE HYMAN: Can I make one more quick-- one just really quick point on that. Another thing to think about as we look at these retail sales numbers is, how do you separate the increase in demand from the increase in price? In other words, when you look at gasoline sales up 2 and 1/2%, how much of that is because there's increased demand from drivers? How much of it is because prices for gasoline have gone up? And obviously, you can't see that just in this data. You need to look at multiple data sets. But that's something to think about as well.

MYLES UDLAND: Certainly, and I guess, that's the reason why they take gasoline out of the core reading, right? Because most of that is going to end up being the cost, which is really a commodity deal.