Retail sales in the United States came in weaker than expected in June, the government reported Tuesday, with consumption remaining sluggish while inflation eases.
US retail sales rose 0.2 percent to $689.5 billion last month, while May’s figure was revised slightly higher, said the Commerce Department.
This comes as consumers in the world’s biggest economy have been depleting savings accumulated during the Covid-19 pandemic, resulting in a hit on spending.
Sales involving motor vehicles and parts dealers weakened last month, while those at food and beverage stores as well as in grocery stores declined on a monthly basis, the latest report showed.
Gasoline station sales slipped 1.4 percent as well from May, while department stores saw a 2.4 percent drop.
Gloomier outlook
Analysts at Pantheon Macroeconomics expect that most pent-up auto demand, which built up when supply was constrained by chip shortages between 2021 and 2022, has been met.
They added in a recent report that there is likely to be a “gradual drift lower in new vehicle sales.”
Meanwhile, “the outlook for retail sales ex-autos and gas is poor,” Pantheon analysts said in their report.
Consumers continue to be pressured by constraints from higher borrowing costs and elevated prices, said Rubeela Farooqi, chief US economist at High Frequency Economics.
“However, a still-strong labor market, positive real disposable incomes and a gradual easing in price pressures appears to be supporting consumption for now,” she added.
To ease demand and rein in inflation, the US central bank has been lifting interest rates rapidly in the past year, and their moves are rippling through the economy.
But Federal Reserve officials are still expected to raise rates again following a two-day meeting next week, after a pause at their last gathering.
While monthly retail numbers missed expectations in June, the upward revision to May data suggests the situation is not too grim, OANDA senior market analyst Craig Erlam said.
“I’m not convinced today’s data really changes things as far as the consumer or economy is concerned… nor has it really changed anything on interest rate expectations, with markets almost fully pricing in a hike next week and probably no more after that,” Erlam added in a note.
In June, consumer inflation cooled to its lowest rate since early 2021, with the consumer price index rising 3.0 percent from a year ago in an encouraging sign for policymakers battling cost-of-living pressures.
