While retail sales rose in June, they were up less than expected for the month, the latest sign of a slowdown in economic growth, according to Reuters. Retail sales rose .4% last month, following a .5% increase in retail sales in May. Economists had forecast a .8% lift in spending for June.
Sales in home furnishings, which rose 2.4% over May’s sales, offered a bright spot, with other areas seeing slower growth. In general, “core sales” edged up a mere .1% over the previous month, following a .2% rise in May, suggesting that consumer spending, which accounts for about 70% of U.S. economic activity, appears to have slowed from the first quarter’s 2.6% annual pace. Core sales do not include automobiles, gasoline or home improvement materials.
“The disappointing retail sales report underscores the soft end to the first half,” said Millan Mulraine, senior economist at TD Securities in New York. “However, what will matter for Fed policy is not the weak performance in the second quarter, but whether spending reaccelerates or remains stuck in the coming months.”
Economists are cautiously optimistic the slowdown in consumer spending will not spill over into the third quarter as employment continues to improve, generating some growth in income.
“When you look at the forward-looking indicators like the income pie and consumer confidence, they all augur for a consumer spending profile that’s going to pick up in the second half of the year,” said Jacob Oubina, senior U.S. economist at RBC Capital Markets in New York.