Retail sales in the U.S. were much stronger than expected in June, indicating resilient consumer spending and calling into question the need for rate cuts from the Federal Reserve in the near future.
Excluding auto dealers, sales at retailers rose by 0.4 percent. Dealership sales were down largely due to a cyberattack in June. Many of the sales that did not happen because of downed systems are expected to occur in July.
The previous month’s ex-auto retail sales figure was revised from a decline of 0.1 percent to a gain of 0.1 percent.
Restaurant sales rose, a key indicator of discretionary consumer spending, rose 0.3 percent, the third consecutive monthly gain.
Excluding both dealerships and gas stations, sales surged 0.8 percent last month. May’s sales were revised up to a 0.3 percent gain from the previous estimate of a 0.1 percent gain. Gas station sales fell 0.3 percent because the price of gas declined sharply in June.
The data indicate that the much-anticipated slowdown in household sector consumption has not arrived, despite a somewhat cooler labor market, high interest rates, and consumers pinched by rising prices.
Thanks to the declines in sales at gas stations and auto dealers, overall retail sales were flat for the month. The only other declining category of retail sales of the thirteen tracked by the Commerce Department was in shops specializing in sporting goods, hobbies, musical instruments, and books.
Sales rose by a strong 0.6 percent in furniture stores and 0.4 percent in electronics and computer stores. Sales at garden centers and building supply stores jumped 1.4 percent. Food and beverage sales were up 0.1 percent.
Health and personal care stores saw a 0.9 percent increase in sales. Sales at clothing stores rose 0.6 percent.
General merchandise and department stores saw sales grow 0.4 percent. Online retailers saw a 1.9 percent sales increase.
Sales in the so-called “control group,” which are used in the calculation of GDP, rose by a very strong 0.9 percent.
The figures are seasonally adjusted but not adjusted for inflation. Retail sales largely reflect the purchase of goods, rather than services. The prices of many goods have been in decline in recent months, so the rising sales numbers likely indicate that consumers are not just spending more but buying more as well.
The strength of consumer spending casts doubt on the need for a Fed rate cut in the months ahead, suggesting the economy has adjusted to higher rates and is continuing to grow at a healthy rate.