U.S. retail sales were flat in June, with a strong underlying trend that could boost second-quarter economic growth expectations. Retail sales were flat last month after an upwardly revised 0.3% gain in May, the Commerce Department’s Census Bureau said Tuesday.
The sales outlook, however, is grim. Households are becoming more price-sensitive and focusing on basic needs, as evident in earnings reports from major retailers and manufacturers. Most households have used up excess savings built up during the pandemic and are carrying large amounts of credit card debt that are becoming increasingly expensive as interest rates remain elevated. Wage growth is also slowing as the labor market cools. Still, the pace of consumer spending remains strong enough to keep the economic expansion on track.
Retail sales excluding autos, gasoline, building materials and food services surged 0.9% last month and rose 0.4% in May. These so-called core retail sales are closest to the consumer spending component of gross domestic product. Before the retail sales data were released, expectations for growth in the April-June quarter were around 2%. The economy grew at a 1.4% pace in the first quarter.
