June retail sales flat May retail sales revised upward from 0.1% to 0.3% Core retail sales increased 0.9%. May data is unrevised.
WASHINGTON, July 16 (Reuters) – U.S. retail sales were flat in June as lower sales at auto dealerships were offset by overall strength elsewhere, a sign of consumer resilience. boosted economic growth forecasts for the second quarter.
A better-than-expected report released by the Commerce Department on Tuesday also showed May sales were higher than originally expected. Expectations remain unchanged that the U.S. Federal Reserve may start lowering interest rates in September as inflation slows, helping to dispel concerns about a sharp economic slowdown.
“The economy is in pretty good shape,” said Bill Adams, chief economist at Comerica Bank. “While there are signs of softening in that low- and middle-income consumers are pulling back, brazen spending by wealthy consumers is driving the overall economy forward.”
Retail sales were flat last month, following an upwardly revised 0.3% increase in May, according to the Commerce Department’s Census Bureau.
Economists polled by Reuters had expected retail sales, which are mostly goods and not adjusted for inflation, to fall 0.3%, following a previously reported 0.1% rise in May. .
Retail sales in June increased by 2.3% compared to the same month last year. However, the momentum has slowed from the 7.7% rise in January 2023. After a period of high inflation, household budgets have declined and are seeking cheaper alternatives, as evidenced by earnings reports from major retailers and manufacturers.
PepsiCo (PEP.O) opens in new tab Chief Executive Ramon Laguarta said last week that low-income consumers are “burdened heavily” and “have to use many strategies to meet their budgets by the end of the month.” “I’m working on it,” he said.
Online store sales rose 1.9% last month, adding to May’s 1.1% increase. Gas station sales decreased 3.0%, reflecting lower pump prices. Cheaper gas will likely free up money for other expenses.
Sales at building materials and garden supply stores increased by 1.4%. Restaurant sales, the only service component included in the report, rose 0.3%, following a 0.4% increase in May. Economists consider eating out to be an important indicator of household finances.
Furniture store sales increased by 0.6%. Sales at electronics retailers increased by 0.4%, and sales at clothing retailers increased by 0.6%. Sales of sporting goods, hobbies, musical instruments, and bookstores decreased by 0.1%.
The amount received by automobile and parts dealers decreased by 2.0%. A cyber attack on software systems provider CDK affected the operations of several car dealerships in late June. Sales lost due to the cyber attack are expected to recover in July.
The unemployment rate rose to 4.1% in June, the highest level in two-and-a-half years, fueling fears that the economy will slow significantly, with financial markets seeing the U.S. central bank begin an easing cycle this month. There is a growing view that there is a slight possibility that this will happen. .
Bets on a rate cut in July were abandoned on Monday after Fed Chairman Jerome Powell gave no indication that a rate cut was imminent at a Washington Economic Club event. Shopping carts are seen at a supermarket in Manhattan, New York, as inflation impacts consumer prices. City, USA, June 10, 2022. Reuters/Andrew Kelly purchases license rights, opens in a new tab
Financial markets are predicting further interest rate cuts in November and December following the September interest rate cut. Stocks on Wall Street were trading significantly higher. The dollar rose against a basket of currencies. US bond prices generally rose.
reuter graphics
Consumers face hurdles
Quincy Crosby, chief global strategist at LPL Financial, said, “This report does not negate the expectation that the Fed will cut interest rates at its September 18th meeting.Of course, the announcement of inflation-related indicators will cause prices to rise. “Unless it is shown,” he said.
Inflation is likely to remain on a declining trend. Import prices were flat in June, according to a separate report from the Department of Labor’s Bureau of Labor Statistics.
Since July last year, the Federal Reserve has maintained its policy interest rate, the overnight rate, in its current range of 5.25% to 5.50%. From 2022 onwards, the policy rate will be raised by 525 basis points.
Retail sales, excluding automobiles, gasoline, building materials and food services, rose 0.9% last month, following a 0.4% increase in May before the revision. These so-called core retail sales most closely correspond to the consumer spending component of gross domestic product.
Economists now estimate that consumer spending, which accounts for more than two-thirds of the economy, grew at an annual rate of 2.0% in the second quarter. The companies had previously expected consumer spending to be on par with the 1.5% increase in the first quarter. Strong performance in core retail sales puts consumer spending on a higher growth trajectory heading into the third quarter.
A separate report released by the Census Bureau showed business inventories rose 0.5% in May after increasing 0.3% in April, also boosting the outlook for second-quarter growth.
The Atlanta Fed raised its second-quarter gross domestic product (GDP) growth forecast to 2.5% from a 2.0% pace. Economic growth in the first quarter was 1.4%.
Still, hurdles to consumer spending still remain. Most households have taken on large amounts of credit card debt after drawing down excess savings accumulated during the coronavirus pandemic, and rising borrowing costs are making the debt even more expensive.
Wage growth is slowing as the labor market eases.
reuter graphics
“Signs remain strong that many consumers are reaching their limits,” said Ben Ayers, senior economist at Nationwide. “This trend is most pronounced among low-income households, which are most sensitive to increases in daily expenses and most at risk of job cuts.”
Sign up here.
Report by Lucia Mutikani. Editing: Chizu Nomiyama, Paul Simao
Our standards: Thomson Reuters Trust Principles opens in a new tab
Purchase license rights
Source link
