US retail sales rose 0.2% in June, following a revised 1% increase in May, according to the Commerce Department's report released Thursday. The control group, which excludes volatile items like gasoline, food service, autos, and building materials, showed a more robust 0.5% increase month-on-month, indicating underlying consumer strength despite broader economic concerns. The modest headline growth reflects shoppers' continued cautious spending approach amid ongoing economic uncertainty and fading benefits from generous government tax refunds. The government figures aren't adjusted for inflation, so last month's decline in gas prices pulled down the overall retail sales figure, with business at gas stations falling 5.3%. As per Associated Press, the data offers only a snapshot of consumer spending and doesn't include activities like travel and hotel stays, with the lone services category - restaurants - registering a modest 0.1% increase.
Non-store (internet) sales continue to be the main source of growth, rising 1.9% month-on-month, likely boosted by Amazon's Prime Day event held from June 23-26. In year-on-year terms, internet sales are up 18% compared to 8.4% YoY for total sales. Sporting goods also saw robust gains, rising 1.3% MoM, supported by World Cup-related spending, though this component also experienced significant inflation within the CPI report. Motor vehicle sales rose 1.9% as shoppers took advantage of summer sales events and aggressive manufacturers' incentives. However, clothing and accessories stores experienced a decline of 0.3%, while grocery sales fell 0.2%, health/personal care dropped 0.8%, and miscellaneous retailers posted a 0.3% decline. Business at furniture and home furnishings merchants remained flat, while electronics and appliance stores showed a small increase for June.
US inflation cooled significantly in June, with consumer prices dropping 0.4% from May to June - the largest monthly decline in four years, according to the Labor Department. Year-over-year inflation declined to 3.5%, down from 4.2% in May and below economists' expectations. Gas prices fell to $3.94 per gallon on Thursday, down from $4.04 a month ago, providing relief to consumers and offering at least a little more cushion in household spending budgets. However, the US renewed attacks on Iran and President Trump announced a new blockade in the Strait of Hormuz, threatening to reverse some of last month's progress. The core inflation figures suggest that the gas price spike from the Iran war, while it pushed up airfares and some other costs, hasn't led to broad-based, sustained inflation.
A report from the Conference Board showed that Americans' economic attitudes improved slightly as gas prices declined, though their outlook remains mostly negative by historical standards. Sarah Williamson, a 27-year-old software support engineer, noted increased consciousness about spending due to rising food and gas costs, leading to reduced discretionary purchases. She avoids buying pre-cut fruits and clothing for herself, recently purchasing a dress for $30 and a cotton nightgown for $72 on Amazon. Brian Reynolds, CEO of Just For Teens, noted his low-price products are in the sweet spot of retailing, with his brand expanding to 10,000 Dollar General stores by October. Major retailers including Walmart, Target, and Macy's are scheduled to report second-quarter earnings next month, which will provide additional insights into shopping behavior patterns. As per Associated Press, the so-called control group—which excludes food services, autos, building materials and gas station sales—rose a solid 0.5%, suggesting consumers are taking a more discerning approach to where they're spending and how they're prioritizing their choices.
