U.S. retail sales edged only modestly higher in June, Commerce Department indicated Tuesday, but a measure that strips out volatile components topped Street forecasts, suggesting consumer spending remains healthy heading into the summer months.
June retail sales rose 0.2% to a collective $689.5 billion, the Commerce Department said, missing the Street consensus forecast of a 0.5% gain. The figure is not adjusted for inflation, and includes overall sales of gasoline and other goods that have been volatile in recent months.
The May total was revised to a gain of 0.5% from the original estimate of a 0.3% month-on-month advance, the report indicated.
Stripping out the auto sector, June retail sales were up 0.2%, the Commerce Department report noted, while stand-alone sales of gasoline fell 1.4% as prices rose to around $3.684 per gallon on average over month, according to data from the U.S. Energy Information Administration, compared to an average of $3.666 per gallon in May.
The closely-tracked control group number, which excludes autos, building materials, office suppliers, gas station sales and tobacco and feeds into the government's GDP calculations, rose 0.6%, more than double analyst's estimates of a 0.2% gain.
US June Retail Sales: Score another win for team soft landing. The control group which feeds into the estimate of GDP was up 0.6% & 2.1% on a 3mo avg annualized basis. That’s consistent with our Q2’23 GDP forecast of 1.7% & implies modest upside risk.
— Joseph Brusuelas (@joebrusuelas) July 18, 2023
Inflationary pressures have eased notably over the past six months, as well, with the Bureau of Labor Statistics' headline June reading slowing to an annualized rate of 3%, the lowest in two years.
"The current picture on the consumer is a bit blurry," said Jeffery Roach, chief economist at LPL Financial. "It seems that excess savings buoyed retail activity in recent months but consumers are quickly depleting those excess reserves and starting to use credit to support spending habits."
"Yields on both 2-year and 10-year treasuries moved a bit following the report but the sales data do not support any material change in expectations for the next Fed meeting. We expect the Fed to hike by 0.25%, but probably for the last time in this cycle," he added.
U.S. stocks turned higher following the data release, with the Dow Jones Industrial Average rising 77 points in the opening hour of trading while the S&P 500 moved 1 point to the upside.
Benchmark 10-year Treasury note yields were little-changed at 3.762% following the data release while the dollar index was marked 0.03% lower on the session at 99.80 against a basket of six global currencies. Benchmark 2-year note yields fell 3 basis points to 4.672%.
