• Following a surge in May, retail sales continued to rise in June, posting a 7.5% month-on-month gain, beating consensus expectations (+3.6%). The May growth rate was also revised up to 18.2% from 17.7%.
  • Three of the four volatile categories of retail sales recorded solid gains last month. Sales of motor vehicles and parts rose by 8.2% m/m, gasoline stations by 15.3%, and food services and drink places by 20%. Conversely, building materials and garden equipment declined slightly in June (-0.3%).
  • Excluding these categories, retail sales growth remained robust, advancing by 5.6% on the month. Sales of clothing and accessories led the charge, rising by 105.1% m/m, followed by a 34.6% increase in furniture and home furnishing sales and a 26.5% pick-up in sporting goods sales.

Key Implications

  • Retail sales posted another impressive gain in June, and have now recovered almost all of the lost ground since the closures of non-essential businesses in March and April. The level of sales is now only -0.6% off the February level. Consumers continued to ramp up spending on items that were previously unavailable to them (i.e. restaurants and bars). However, even excluding the contribution of food and drinking places, retail sales growth was still up a solid 5.9% for the month.
  • The strength in retail spending despite a double-digit unemployment rate is thanks to income supports established in the CARES Act (i.e. one-time checks, and expanded unemployment benefits). These measures have more than offset the loss of employment income for most households. It is worrying that generous top-up to weekly unemployment benefits is set to expire at the end of July, just as high-frequency indicators suggest that small businesses are beginning to lay off workers again due to renewed closures in many areas of the country.
  • Congress is working on a deal to provide additional support to households. Without it, consumers will likely tighten purse strings, and retail sales could again see declines in the months ahead.


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