Key facts
- U.S. retail sales rose 0.2% in June, below expectations.
- Lower gasoline prices contributed to the marginal increase in retail sales.
- Core retail sales, excluding autos, gasoline, building materials, and food services, rose 0.5% in June.
- The Federal Reserve's Beige Book reported slight increases in U.S. economic activity and employment.
- The Beige Book indicated that inflation may be easing, with price growth stable or slower in several districts.
- Some districts noted consumers trading down to more affordable goods and services.
U.S. retail sales saw a marginal increase of 0.2% in June, falling short of economists' expectations for a 0.2% gain after a revised 1.0% jump in May. Lower gasoline prices, which decreased to an average of $4.18 per gallon from $4.61 in May, contributed to the modest rise, freeing up consumer spending for other goods and services. Core retail sales, excluding volatile categories like autos, gasoline, building materials, and food services, increased by 0.5% in June, following a revised 0.8% rise in May, potentially boosted by events like Amazon's Prime Day and the FIFA World Cup.
Consumers are increasingly seeking value, with spending at discount clothiers and grocers rising, particularly among lower-income households. However, household budgets remain strained by higher prices from tariffs and recent Middle East conflict, though higher-income households have benefited from a stock market rally. The Federal Reserve's latest Beige Book report indicated that U.S. economic activity and employment rose slightly across its districts in early July. Firms and households surveyed suggested that inflation may be improving, with price growth described as stable or slower, though some districts noted declines in spending on discretionary items or trading down to more affordable varieties.
Federal Reserve Chair Kevin Warsh has remained silent on future policy, contrasting with colleagues who have voiced differing views on inflation and rate hikes. While some policymakers like Lisa Cook expressed concerns about inflation risks, others like John Williams and Christopher Waller offered more sanguine outlooks. Economists anticipate that consumer spending, a key driver of the economy, picked up in the second quarter, with the Atlanta Fed forecasting 1.3% GDP growth for the April-June period.