US retail sales flat in June and beat negative forecast

The unchanged retail sales in June, despite expectations of a decline, suggest a stronger underlying trend in consumer spending which could positively influence economic growth estimates for the second quarter.
This stable performance follows a revised gain of 0.3% in May, up from the initially reported 0.1% gain, defying economists’ predictions of a 0.3% decline for June.
However, the outlook remains cautious as households show increased price sensitivity and prioritize basic needs, as reflected in earnings reports from major retailers and manufacturers. This behavior is influenced by the depletion of excess savings accumulated during the COVID-19 pandemic and the rising burden of credit card debt amidst high interest rates.
Additionally, wage growth is slowing as the labor market cools.
Despite these challenges, consumer spending has remained robust enough to support ongoing economic expansion.
This is evidenced by the significant rise in core retail sales (excluding automobiles, gasoline, building materials, and food services), which jumped 0.9% in June following a 0.4% increase in May.
Core retail sales are a key indicator closely aligned with the consumer spending component of GDP.
Prior to the release of the retail sales data, growth estimates for the April-June quarter were around 2%, up from the 1.4% growth rate recorded in the first quarter.
This resilience in consumer spending, despite broader economic headwinds, underscores the continued potential for economic growth.