Retail sales in the United States unexpectedly increased in June, as demand for goods remained strong even as spending shifted to services, raising expectations of accelerating economic growth in the second quarter.
The sales rebound reported by the Commerce Department on Friday came despite a further decline in motor vehicle purchases due to a lack of supply caused by a global semiconductor shortage. The scarcity of new motor vehicles is driving demand for used cars and trucks, which helps fuel inflation.
Covid-19 vaccinations, low interest rates and massive fiscal stimulus are supporting retail sales.
“Many retailers are benefiting from increased in-store traffic as well as higher prices for items on the shelves, a much needed rebound for many companies in the service industry,” said Ben Ayers, senior economist at Nationwide in Columbus, Ohio.
Retail sales rose 0.6% last month. Data for May has been revised down to show that sales fell 1.7% instead of 1.3% as previously reported. Economists polled by Reuters predicted a drop in retail sales of 0.4%.
Sales jumped 18.0% from June last year and are now well above their pre-pandemic level. Demand shifted to goods like electronics and motor vehicles during the pandemic as millions of people worked from home, took online classes and avoided public transportation.
Spending now goes to services such as travel and entertainment, with at least 160 million Americans fully immune to COVID-19. Retail sales are primarily goods, with services such as healthcare, education, travel, and hotel accommodation making up the remaining portion of consumer spending.
Restaurants and bars are the only category of services in the retail sales report.
US stock index futures posted gains after the data. The dollar remained stable against a basket of currencies. Yields on the US Treasury rose.
Receipts at car dealerships fell 2.0% after declining 4.6% in May. Clothing store sales increased 2.6%. Consumers increased their spending in restaurants and bars, leading to a 2.3% increase in revenue. Sales in restaurants and bars increased by 40.2% compared to June 2020.
Receipts at electronics and appliance stores increased 3.3%; furniture store sales fell 3.6%. Sales at sporting goods, hobby, musical instrument and book stores fell 1.7%. Receipts at food and beverage stores increased 0.6%. Sales at building supply stores fell 1.6%.
Online retail sales rose 1.2%, likely thanks to Amazon’s Prime Day, which was emulated by other retailers.
Excluding autos, gasoline, building materials and food services, retail sales rose 1.1% last month after declining 1.4% in May. These so-called basic retail sales correspond most closely to the consumer expenditure component of gross domestic product. They were previously estimated to have fallen 0.7% in May.
“With the reopening of the economy, spending on services has started to increase and may divert some spending from goods to certain services that are not captured in the retail sales report,” said Kevin Cummins, economist Chief US Officer at NatWest Markets in Stamford, Connecticut.
Economists expect consumer spending, which accounts for more than two-thirds of US economic activity, to post double-digit growth in the second quarter. Consumer spending grew at an annualized rate of 11.4% in the first quarter.
Households have accumulated at least $ 2.5 trillion in excess savings during the pandemic, which is expected to boost spending this year and beyond. From July to December, some households will receive income under the Expanded Child Tax Credit program, which will soften the blow of an early termination of government-funded unemployment benefits in at least 24 states.
Gross domestic product growth estimates for this quarter are around 9%, which would represent an acceleration from the 6.4% pace recorded in the first quarter. Economists estimate that the economy could grow at least 7% this year. It would be the fastest growing since 1984. The economy contracted 3.5% in 2020, its worst performance in 74 years.
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