Sales rose more than expected in June as consumers remain resilient despite inflation

A pedestrian carries a shopping bag while crossing Union Square on May 17, 2022 in San Francisco, California.

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Consumer spending held up during June’s inflation spurt, with retail sales rising slightly more than expected for the month amid rising prices in most categories, the Commerce Department reported Friday.

Advance retail sales rose 1% for the month, better than the Dow Jones estimate of a 0.9% increase. This marked a big jump from the 0.1% decline in May, a figure that has been revised up from the initial report of a 0.3% decline.

Unlike many other government figures, the retail figures are not adjusted for inflation, which rose 1.3% during the month, indicating that real sales were slightly negative.

Rising costs for food and gasoline in particular helped propel the increase, which was nonetheless broad-based by the various measures in the report.

Excluding autos, the monthly increase was also 1%, beating the estimate of 0.7%.

Markets rallied after the news, with stock futures pointing to a significantly higher open on Wall Street. Yields on government bonds fell.

Gasoline sales rose 3.6% as prices at the pump briefly topped $5 a gallon, a move that has since eased with the drop in oil prices in July.

Sales at bars and restaurants increased by 1%, while online sales increased by 2.2% and sales at furniture and home stores increased by 1.4%.

The retail trade report shows consumers have shown resilience in the face of the highest rate of inflation since November 1981.

Consumer prices in June rose 9.1% from a year ago, a product of record gasoline prices and the spread of inflation that pushed rents to their highest monthly gain since 1986 and dental care at its strongest increase since at least 1995.

Despite the increases, consumer finances held up well.

Debt to after-tax income has increased, but at 9.5% it remains well below longer-term levels, according to Federal Reserve data. Household net worth fell slightly in the first quarter, mainly due to a decline in the stock market which reduced equity holdings by $3 trillion.

However, other economic data points weakened.

Although spending continues, consumer confidence is at historic lows. Housing data has been weak lately and regional manufacturing surveys reflect a slowdown. A Fed survey released earlier this week showed concerns about escalating inflation and recession.

However, a report from the New York Fed on Friday morning provided good news on the manufacturing sector.

The Empire State Manufacturing survey for July posted a reading of 11.1, representing the percentage difference between companies experiencing expansion versus contraction. That was significantly better than the Dow Jones estimate for minus-2, and reflected big gains in shipments, a welcome change given supply chain issues that have helped boost inflation.

The survey showed that prices remain high, but the share of companies registering increases is decreasing.

Businesses, on the other hand, became pessimistic about the future, with a net 20.2% seeing conditions worsen over the next six months.

Fed policymakers have responded to the inflation problem with a series of rate hikes and are expected to approve another hike later this month that could reach 1 percentage point, the biggest such hike since the central bank started using its reference rate to implement its policy nearly 30 years ago. from.

Fed Governor Christopher Waller said on Thursday that the retail sales report would be key in determining whether to raise 75 basis points or 100 basis points at the 26-27 meeting. July.

Sales rose more than expected in June as consumers remain resilient despite inflation

Source link Sales rose more than expected in June as consumers remain resilient despite inflation

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