U.S. retail sales increased 2.3 percent annually in June, slowing from a 7.7 percent increase in January 2023, but still signaling consumer resilience which bolstered economic growth expectations for the second quarter. After a period of high inflation, consumers are trading down and seeking cheaper alternatives, as evident in earnings reports from major retailers and manufacturers, which impacted the growth momentum of spending and retail sales in the U.S.
The better-than-expected report from the U.S. Department of Commerce also revealed that retail sales in May were higher than initially estimated. However, this did not impact expectations that the Federal Reserve could start cutting interest rates in September amid declining inflation. The unchanged reading in U.S. retail sales in June followed an upward revision of 0.3 percent in May, the Department of Commerce’s Census Bureau added.
Sectors see mixed growth
Online store retail sales rose 1.9 percent last month, adding to a 1.1 percent increase in May. Meanwhile, sales at gasoline stations dropped 3 percent. The report also reveals that building material and garden equipment store retail sales in the U.S. rose 1.4 percent in June while sales at food and beverage outlets gained 0.3 percent in June after rising 0.4 percent in May.
In addition, the US retail sales report reveals that furniture store sales rose 0.6 percent while receipts at electronics and appliance outlets gained 0.4 percent. Meanwhile, clothing retailer receipts increased 0.6 percent. Sales at sporting goods, hobby, musical instrument and bookstores, however, declined 0.1 percent in June. Motor vehicle and part sales declined 2 percent.
The report also reveals that core U.S. retail sales, which exclude automobiles, gasoline, building materials and food services, rose 0.9 percent in June after a 0.4 percent unrevised gain in May.
Read: IMF cuts Japan’s 2024 growth forecast to 0.7 percent, sees 1.0 percent expansion in 2025
Rising unemployment sparks concern
The rise in the U.S. unemployment rate to a 2.5-year high of 4.1 percent in June sparked fears of a significant moderation in the economy, prompting financial markets to see a slight chance of the U.S. central bank starting its easing cycle this month. However, markets dismissed the July rate-cut expectations on Monday when Fed Chair Jerome Powell gave no indication of a rate cut this early.
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