Retail sales were flat in June, defying Wall Street expectations of a decline amid signs the U.S. economy is slowing.
Economists had expected spending to fall 0.3%, according to Bloomberg data. Meanwhile, Census Bureau data showed retail sales rose to a 0.3% increase in May from a previous reading of a 0.1% increase.
Sales excluding autos and gasoline rose 0.8% in June, beating market expectations of a 0.2% increase. A control group released on Tuesday that strips out several volatile categories and factors them into quarterly gross domestic product figures rose 0.9% in June, beating market expectations of a 0.2% increase.
“Retail sales were flat in June, but showed a healthy increase of 0.9%. [month-over-month] “Control group sales gains should ease concerns about consumer hardship as consumer sentiment weakens again,” Paul Ashworth, chief North American economist at Capital Economics, wrote in a client note. “Indeed, second-quarter consumption and GDP growth both appear to have failed to exceed an annualized 2% rate, but strong gains in June should lead to improved third-quarter results.”
Non-store retailers had the highest growth rate of any industry, increasing by 1.9%. Gas stations saw the biggest declines, with sales down 3%. Auto and parts dealers also saw a 2% decrease.
The update on consumer spending comes as the U.S. economy is cooling but still growing. The latest data, combined with higher-than-expected inflation numbers, have the market betting the Fed will cut interest rates for the first time by the end of its September meeting.
“The report suggests that consumers are holding up well — maybe not at the same breakneck pace of spending we saw in the second half of last year, but they’re certainly not falling precipitously,” Robert Sokkin, senior global economist at Citi, told Yahoo Finance. “And concerns that the economy may slow even more sharply will take some of the urgency off the Fed to ease interest rates. So, given how inflation is evolving, I think the Fed will signal at its July meeting that a September rate cut is very likely.”
Federal Reserve Chairman Jerome Powell, in an interview with the Economic Club of Washington on Monday, declined to say when the Fed would begin an easing cycle.
“I’m not going to send a signal about any particular meeting,” he said. “We will make these decisions on a meeting-by-meeting basis and taking into account the evolving data and balancing of risks.”
A sale sign hangs on a clothes rack at a store in Chicago, Monday, June 10, 2024. On Thursday, July 11, 2024, the Labor Department releases its report on consumer-level inflation for June. (AP Photo/Nam Y. Huh) (The Associated Press)
Josh Shaffer is a reporter for Yahoo Finance. Follow him on X Follow.
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