US Retail Sales Edge Higher as Key Metric Shows Resilient Demand

US retail sales rose by less than forecast, while an underlying measure of household spending pointed to a more resilient consumer at the end of the second quarter.

(Bloomberg) — US retail sales rose by less than forecast, while an underlying measure of household spending pointed to a more resilient consumer at the end of the second quarter.

The value of retail purchases rose 0.2% in June after an upwardly revised 0.5% increase in May, Commerce Department data showed Tuesday. The figures aren’t adjusted for inflation.

So-called control group sales — which are used to calculate gross domestic product and exclude food services, auto dealers, building materials stores and gasoline stations — accelerated to a 0.6% advance, twice the prior month’s gain. 

The government’s first estimate of second-quarter GDP will be released next week, and several economists said after the report that the sales figures point to momentum entering the third quarter.

Sales increased in seven out of 13 retail categories last month, including advances at non-store retailers, electronics stores and furniture outlets. The value of purchases at building materials stores, gas stations and grocery stores declined.

A strong labor market and easing inflationary pressures continue to underpin American consumers, but high borrowing costs and elevated prices are straining household budgets.

The figures largely reflect spending on goods, rather than services, limiting the takeaways of this particular report. While consumers are shifting more of their outlays away from merchandise toward services, the report suggested spending on some goods is holding up.

What Bloomberg Economics Says…

“We see headwinds to demand intensifying, with financial distress to disproportionately impact lower-income households — something that will weigh on retail sales in months ahead.”

— Eliza Winger

To read the full note, click here

Receipts at restaurants and bars — the only service-sector category in the report — edged up a modest 0.1% after surging 1.2% in the prior month. The state of the US consumer will become clearer when inflation-adjusted figures on spending on merchandise and services are released later this month.

By and large, Americans’ finances remain in good shape by historical standards. Inflation-adjusted earnings, after falling for two years, have started to rise in recent months. A report last week showed consumer prices rose at the slowest pace since early 2021.

“If we start to see this inflation really start to cool, that puts more money into people’s pockets across the board, no matter what the income demographic is,” Chuck Grom, managing director at Gordon Haskett Research Advisors, said on Bloomberg Television.

But there are growing signs of stress. Delinquency rates are rising, and nearly four in 10 households reported in June that it was somewhat or very difficult to pay for usual household expenses. This fall, student-loan borrowers will resume monthly payments, further limiting discretionary purchases for millions of people. 

Read More: Americans Buy Cheaper Toothpaste in Threat to Company Growth

–With assistance from Kristy Scheuble and Edward Dufner.

(Adds Bloomberg Economics comment)

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