Analysis of June US Retail Sales Report and Future Outlook
Retailers Beat Expectations in June
The June US retail sales report has exceeded expectations, with headline sales remaining flat on the month. Despite forecasts for a 0.3% month-on-month drop, May’s figures were revised up by two-tenths of a percentage point to show 0.3% MoM growth.
While motor vehicle sales fell by 2% MoM, in line with expectations, other sectors saw strong growth. Non-store (largely internet) sales rose by 1.9% MoM, building materials jumped by 1.4%, and clothing and furniture both increased by 0.6%. Health and personal care also saw a 0.9% increase in sales.
The hot weather may have incentivized households to spend more time in air-conditioned retail stores and shopping malls, contributing to the overall increase in sales. However, the data reflects nominal US dollar value changes, with real (volume) terms retail sales remaining around 4 percentage points below their 2021 peak.
Looking ahead, challenges remain as consumer spending is expected to revert to a slowing trend. Flat real household disposable incomes, the exhaustion of pandemic-era savings, and high consumer credit costs are all factors contributing to a more cautious consumer sector. Slower consumer spending growth, moderating inflation, and rising unemployment rates may lead the Fed to consider a slightly less restrictive policy position starting in September.
Overall, the retail sales report for June paints a mixed picture of the US economy, with some sectors showing strength while others face challenges. The upcoming GDP report will provide further insight into the state of consumer spending and its impact on the broader economy.
