You will be redirected back to your article in seconds
Skip to main content

US Retail Sales Show Consumer Spending ‘Still on the Uptick’

U.S retail sales rose 0.4 percent in June, better than the expected 0.1 percent gain, and representing continued growth over a revised 0.4 percent gain in May.

Mickey Chadha, vice president at credit ratings agency Moody’s Investors Service, said the better than expected increase “demonstrates that consumer spending is still on the uptick and the fear of a slowdown in consumer confidence is premature.”

The U.S. Census Bureau, which tracks monthly retail sales, said Tuesday that online and other non-store sales rose 11.6 percent year-over-year, while general merchandise stores were up 2.3 percent for the same period. Within the general merchandise category, department stores saw sales decline by 5.4 percent. Apparel and accessories stores, including shoe retailers, were down 1.6 percent year-over-year, while sporting goods stores were down even further at 5.3 percent for the same period.

“We believe retail sales growth for 2019 will be over 4.0 percent led by e-commerce players like Amazon, off-price retailers like TJX and Ross, value and convenience oriented retailers like Dollar General and Dollar Tree, and discounters and warehouse clubs like Walmart and Target,” Chadha said. “Continued strong macroeconomic trends are also expected to remain in place for the rest of the [year] with low unemployment and wage growth continuing to bolster retail sales.”

As the National Retail Federation’s chief economist Jack Kleinhenz, noted, “The numbers are consistent with elevated consumer sentiment, healthy household balance sheets, low inflation and wage and job gains. The year-over-year growth is particularly significant given that it comes on top of strong gains at this time last year.”

Related Stories

UBS economist Seth Carpenter is estimating second-quarter consumption growth at 4.2 percent. While consumers are very sensitive to risk, such as pulling back on consumption when there’s a job loss, Carpenter said, right now, the household sector “does not see a downturn coming.”

Consumer spending accounts for roughly two-thirds of economic activity in the U.S. and a healthy household sector is just one component of the economic picture. Carpenter said the Fed’s fears over the near-term outlook are more about “fear [over] business confidence.”

The June retail sales report is not expected to impact the Federal Reserve’s decision on whether to cut interest rates when the FOMC meets at the end of July. The Fed acts independently and has been trying to keep inflation levels at around 2 percent. There have been concerns, however, about a possible economic slowdown later this year, and U.S. President Donald Trump has been pushing for a rate to sustain economic expansion.

The FOMC in its June statement did note it would “act as appropriate” when determining monetary policy. And Federal Reserve Chairman Jerome Powell has since signaled an openness to a rate cut, citing concerns over global economic weakness, along with unresolved trade tensions, as possible factors that could impact the U.S. economy. The U.S.-China trade dispute is one of those unresolved matters.

“While the prospect of tariff increases has subsided for the moment, trade uncertainties continue to weigh on the long-term outlook,” Kleinhenz said Tuesday.