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Published
Jul 17, 2018
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Strong U.S. retail sales in June lift second-quarter GDP estimates

By
Reuters
Published
Jul 17, 2018

U.S. retail sales rose solidly in June as households boosted purchases of automobiles and a range of other goods, cementing expectations for robust economic growth in the second quarter.

Retail sales in June gained 6.6 percent from a year ago - Reuters


Signs of a strengthening economy, together with a tightening labor market and firming inflation, likely will keep the Federal Reserve on track to continue raising interest rates this year.

Fed Chairman Jerome Powell offered an upbeat assessment of the economy last Friday, telling lawmakers that “over the first half of this year, overall economic activity appears to have expanded at a solid pace.”

The U.S. central bank raised interest rates in June for the second time this year and has forecast two more rate hikes by the end of 2018.

“This puts the economy in a very, very good position as it starts its 10th year of forward movement in July,” said Chris Rupkey, chief economist at MUFG in New York. “This strengthening economy gives the Federal Reserve the green light to raise rates a third time this year at their September meeting.”

The Commerce Department said on Monday retail sales increased 0.5 percent last month. Data for May was revised to show sales rising 1.3 percent, the largest since September 2017, instead of the previously reported 0.8 percent gain.

Economists had forecast retail sales rising 0.5 percent in June. Retail sales in June gained 6.6 percent from a year ago.

In June, auto sales rose 0.9 percent after advancing 0.8 percent in May. There were increases in online sales as well as receipts at service stations, building materials stores, furniture shops and restaurants and bars.

But sales at clothing stores fell 2.5 percent, the biggest drop since February 2017. Sales at supermarkets, electronics and appliance stores and general merchandise shops also fell. Americans also cut back spending on hobbies.

Excluding automobiles, gasoline, building materials and food services, retail sales were unchanged last month after an upwardly revised 0.8 percent increase in May.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product and were previously reported to have risen 0.5 percent in May.

Given the upward revision to May’s data, the unchanged reading in core retail sales last month did not change views consumer spending accelerated in the second quarter.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, braked in the January-March period, growing at its slowest pace in nearly five years.

The dollar slipped against a basket of currencies. Stocks on Wall Street were lower. U.S. Treasuries fell, with the yield on the interest rate-sensitive two-year note rising to a near 10-year high.

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