US retail sales rose less than expected in June, although consumer spending appeared strong, which may have kept the economy growing in the second quarter.
Retail sales rose 0.2% last month, the Commerce Department said on Tuesday. Data for May has been updated upwards, showing sales increased by 0.5% compared to 0.3% as previously reported.
Economists polled by Reuters had forecast a 0.5% increase in retail sales. Retail sales refer mostly to goods and are not adjusted for inflation. Food and beverage services are the service categories found in the retail sales report.
Spending has remained strong even as interest rates have been raised by 500 basis points by the Federal Reserve since March 2022, as the US central bank began its fastest series of monetary policy tightening in more than 40 years.
A tight labor market continues to boost wage growth while some households still have savings built up during the COVID-19 pandemic. Consumer purchasing power is also increasing gradually as inflation subsides.
Excluding vehicles, gasoline, construction materials, and food services, retail sales rose 0.6% in June. Data for May was slightly updated to show that core retail sales rose 0.3% compared to the previously reported 0.2%.
Core retail sales are closely related to the consumption expenditure component of gross domestic product. A strong increase in June and a rebound in core retail sales in May showed that consumer spending, which accounts for more than two-thirds of the US economy, continued to grow last quarter. However, the pace may be slower than the first quarter rate, which was the fastest growth rate in almost two years.
Economic growth estimates for the second quarter are currently at an annual rate of 2.3%. The economy has grown at a rate of 2.0% in the January-March quarter.
