• Following a strong print in May, retail sales advanced handsomely in June, rising by 0.4%. The headline exceeded the median survey estimate for 0.2% gain. May’s print was revised a touch lower from +0.5% in the advance reading to still-healthy 0.4%.
  • The retail sales “control group” which excludes the most volatile components (gas, autos, building materials, and food services) posted an even more impressive gain of 0.7%, well ahead of expectations for 0.3%. To top it off, May’s “control group” print was revised up from a +0.5% advanced reading to +0.6%.
  • Most sub-categories gained in the month, with non-store retailers (+1.7%) again leading the way. Other big gainers were motor vehicles and parts dealers (+0.7%) and eating and drinking places (+0.9%) . Sales also rose at food & beverage, clothing and health & personal care stores (all three up by 0.5%). Ditto for sales of building materials and furniture (both up 0.5%). For the second quarter as a whole, furniture sales were up 8.2% (annualized), rebounding after three consecutive quarters of declines.
  • Pulling back in the month were sales at department stores (-1.1%), gasoline stations (-2.8%), and electronics stores (-0.3%).

Key Implications

  • Please fasten your seat belts. Another month, another strong retail report. After a soft first quarter, consumers flocked en masse to both brick-and-mortar stores as well as online in the second quarter. Retail sales rose smartly in each of the past four months, and were up 7.5% (annualized) for Q2 as a whole – the strongest quarterly result since Q4 2017. This bodes well for real consumer spending in the quarter, which we expect to come in around 4.0% (annualized) in the second quarter.
  • With other GDP components, like business investment and trade, downshifting on the back trade uncertainty, the onus falls on American consumers to drive economic growth. It seems that they are up to this task. With household wealth rebounding, interest rates trending lower and job and wage growth continuing unabated, fundamentals are in place for consumer spending to remain healthy.


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