The Higgins Report: Inflation Cools, But Not Consumer Spending

By Joe Higgins, Quest 4 Quality

  • Inflation data cooled in July for the first time this year, legitimizing the Fed’s direction that it’s transitory.
  • Total July retail sales rose 16 percent year over year.
  • Mixed signals in the economy should give way to a strong finish in the second half of 2021.

BrandSource members should remain confident that business will remain solid this year, even with the lingering supply-chain issues plaguing our industry. Here’s why.

July Retail Sales 

Economists had great hopes for July, and although total U.S. retail sales slipped 1.1 percent from June, sell-through was up 15.8 percent from a year ago, with appliance and electronics stores leading the pack.

Several issues impacted the overall July numbers. There was concern over the COVID-19 delta variant, and the continuing chip shortage dragged down sales of light trucks and automobiles, which had an overwhelming impact on retail figures.

Also, the bump we expected from consumers spending their stimulus cash and bloated savings accounts didn’t materialize, as shoppers began shifting their spending from goods to services. Indeed, as American consumers opted for entertainment and vacations, we saw long lines at TSA checkpoints, increased restaurant bookings, and lower vacancy rates at hotels.

Fortunately for BrandSource members, this shift in spending patterns did not impact the home goods business, as sales at appliance and electronics stores were up 23.4 percent year over year, and furniture and home furnishings stores saw July sales rising 15.6 percent from a year ago.

Keep in mind that retail sales are made up mostly of durable goods like furniture and appliances; services are not a component of that number except for spending in bars and restaurants. I believe that with the emergence of the delta variant, consumers will continue spending money on their homes.

Another thing to watch for this month: Families that qualify under the Child Tax Credit program will receive automatic monthly payments of $300 per child. This program is likely to drive additional spending into next year.

The slight hiccup in July’s retail sales has not dampened my expectations for a strong finish in 2021. We had two very robust months of job creation; home prices are in the stratosphere; 401Ks are rising; and net worth is at an all-time high. With oversized bank accounts, high levels of credit available, and historically low interest rates, retail should continue to expand. 


Earlier this month the Bureau of Labor Statistics reported on the Consumer Price Index for July, with some good news on the inflation front. With the exception of major appliances, prices largely cooled off, rising only 0.5 percent over June and 5.4 percent over last year. The leveling in the index can be attributed to used car prices rising only 0.2 percent last month and airline ticket prices easing by 0.1 percent. Meanwhile, prices for corn, copper and wood saw dramatic declines from last year. Each of these commodities had driven significant price increases over the past 12 months. 

This news legitimizes Fed Chairman Jerome Powell’s contention that much of the inflationary impact of rising prices that we have experienced in our economy will be temporary. However, I think it is too early to say that current price increases will fade, and there is a risk of long-term inflation in the future. 

The Delta Variant 

The virus has always been my wildcard. It’s a leading economic indicator in today’s environment and it makes it difficult to predict our future business climate.

So how will this new coronavirus variation impact our business? I have watched the numbers from the CDC over the past year and every viral surge since March of 2020 has had a successively smaller impact on our economy. Yes, the virus has been disruptive, but since so many Americans have been vaccinated since January, we have learned to deal with COVID-19 and not let it affect our lives as we did 15 months ago. You may remember empty freeways, ball games without fans, and shuttered communities. All that has changed.

One of the best reflections of this phenomenon is the stock market, which today sits at historic highs, seemingly oblivious to the impact of delta. Stay tuned, for this is an ever-changing narrative.

The Bottom Line

I have mixed feelings about our economy given the challenges of the virus. I think consumer confidence will experience a significant drop this month, which may impact spending. Home sales have slowed now that prices are beyond consumers’ ability to afford them. Stimulus spending has dried up, and it doesn’t look like Congress is in any mood to provide additional resources.

On the other hand, interest rates are low, job creation is dynamic, wages are rising, and consumers still have cash and credit in abundance. Which means BrandSource members should remain in good stead through remainder of 2021.

Joe Higgins is a 42-year veteran of GE and Whirlpool Corp. who brings his experience to bear as a business consultant, public speaker, AVB keynoter and YourSource News contributor. Visit his website, Quest 4 Quality with Joe, at