Retail sales up a surprising 0.6 percent in June after a May pullback by consumers
Excluding autos and automotive parts, sales rose 0.5 percent, according to the Commerce Department. There was broad-based strength across the board. Clothing and accessories stores posted a 0.9 percent sales increase, while restaurants had a 0.6 percent increase. Online retailers saw a 0.4 percent gain.
The retail sales report arrives amid a whipsaw frenzy of on-again, off-again tariffs that have jolted businesses and households. For businesses, that has made it harder to manage supply and inventories. Americans are focusing more on necessities when they do shop. The latest government report showed that inflation rose last month to its highest level since February as Trump's sweeping tariffs push up the costs of everything from groceries and clothes to furniture and appliances. Consumer prices rose 2.7 percent in June from a year earlier, the Labor Department said Tuesday, up from an annual increase of 2.4 percent in May. On a monthly basis, prices climbed 0.3 percent from May to June after rising just 0.1 percent the previous month.
Trump insists that the US effectively has no inflation as he has attempted to pressure Federal Reserve Chair Jerome Powell into reducing short-term interest rates. Yet the new inflation numbers make it more likely that the central bank will leave rates where they are. Powell has said that he wants to measure the economic impact of Trump's tariffs before reducing borrowing costs.
Americans have continued to spend, but they appear to be growing cautious. A big litmus test was Amazon's four-day Prime event along with competing retail sales from the likes of Walmart and Target that kicked off last week. Adobe Digital Insights, which tracks online sales, reported that the sales events drove 24.1 billion in online spending, a 30.3 percent increase compared with the same period last year. But those buying prioritized lower priced essentials like dish soap and paper products over big-ticket purchases, according to consumer data provider Numerator based on its analysis of Amazon Prime orders.
Deborah Weinswig, founder and CEO of Coresight Research, said she's becoming more optimistic about the financial health of the consumer after the Amazon Prime events. She said inventories are at a healthy level, and she didn't see these big fire sales. 'People aren't buying things that they don't need,' she said. 'I think it's a healthier retail environment.'
Retailers are now turning their attention to the back-to-school shopping season, which is the second largest shopping period behind the winter holidays. Coresight Research estimates that total US back-to-school spending will increase by 3.3 percent year compared with the year-ago period to 33.3 billion. And it predicts that shoppers will do a big chunk of their shopping before August to get ahead of tariffs.
Economists will also dissect quarterly financial reports next month from major retailers like Walmart, Target, and Macy's both for consumer behavior and to gauge how businesses are navigating a chaotic period of global trade due to fluid US policies. Levi Strauss & Co. said last week that it was cutting back on making styles that aren't selling and making targeted price increases as it moves production away from China due to tariffs.
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