US retail sales unchanged in June, beating expectations for a slight decline

US retail sales remained unchanged in June and the underlying trend was strong, which could boost economic growth estimates for the second quarter.

Last month’s flat reading for retail sales followed an upwardly revised 0.3% gain in May, the Commerce Department’s Census Bureau said Tuesday.

Economists surveyed by Reuters had forecast retail sales, which are mostly goods and not adjusted for inflation, would fall 0.3% after a previously reported 0.1% rise in May.

However, sales prospects are unfavorable.

Households are becoming more price-sensitive and focused on basic needs, as evidenced by earnings reports from major retailers and manufacturers.

PepsiCo Chief Executive Ramon Laguarta said last week that low-income consumers were “on the edge” and “devising many strategies to make ends meet.”

Most households have exhausted excess savings accumulated during the COVID-19 pandemic and are saddled with credit card debt, which is becoming more expensive as interest rates remain high.

Wage growth is also moderating as the labor market cools. However, the pace of consumer spending remains sufficient to keep the economic expansion going.

Retail sales, excluding automobiles, gasoline, building materials and food services, rose 0.9% last month after increasing 0.4% in May. These so-called core retail sales correspond more closely to the consumer spending component of gross domestic product.

Growth estimates for the April-June quarter were around 2% before the retail sales data. The economy grew at a rate of 1.4% in the first quarter.

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