U.S. Retail Sales Unchanged in June, Consumer Resilience Bolsters Economic Growth
By Lucia Mutikani
WASHINGTON (Multibagger) - In a surprising turn of events, U.S. retail sales remained unchanged in June despite a drop in auto dealership receipts. However, the overall strength in other sectors displayed consumer resilience, which has bolstered economic growth prospects for the second quarter.
The Commerce Department's report on Tuesday showed that sales in May were higher than initially estimated, leading to optimism among economists. This positive data did not change expectations of the Federal Reserve potentially cutting interest rates in September, amidst cooling inflation.
Bill Adams, chief economist at Comerica Bank, commented, "The economy is in pretty good shape. There are signs of softness among low- and moderate-income consumers, but affluent consumers continue to spend generously, keeping the economy moving forward."
While retail sales remained steady last month following a 0.3% gain in May, economists had predicted a 0.3% decline. Retail sales saw a 2.3% increase on a year-on-year basis in June, although the momentum has slowed from earlier in the year.
Online store sales surged by 1.9% in June, while sales at gasoline stations dropped by 3.0%. Building material and garden equipment store sales saw a 1.4% increase, and food services and drinking places gained 0.3%. Furniture and electronics store sales also saw modest growth.
However, motor vehicle and parts dealers experienced a 2.0% decline, partially due to a cyberattack at CDK affecting operations at several dealerships. The unemployment rate rose to 4.1% in June, sparking fears of an economic slowdown, but Fed Chair Jerome Powell's recent statements have reassured markets.
Looking ahead, economists predict consumer spending to grow at a 2.0% annualized rate in the second quarter, with core retail sales showing a strong performance. The Atlanta Fed has upgraded its GDP growth estimate for the second quarter to 2.5%, indicating a positive outlook for the economy.
Despite these positive trends, hurdles remain for consumer spending, including slowing wage growth and increased credit card debt. Lower-income households are particularly vulnerable to rising costs and potential job cuts.
Overall, the retail sales data provides insights into consumer behavior and economic health, pointing towards a moderate but steady growth path for the U.S. economy.