US retail sales experienced a significant rebound in June, surpassing expectations and indicating a slight upswing in economic activity. This development provides the Federal Reserve with leeway to postpone interest rate cuts as it assesses the impact of import tariffs on inflation. According to the Commerce Department’s Census Bureau, retail sales increased by 0.6 per cent last month, following an unrevised 0.9 per cent decrease in May. Economists had anticipated a more modest gain of 0.1 per cent. Year-over-year, sales advanced by 3.9 per cent.
Supporting this positive trend, data from the Labor Department revealed that initial applications for unemployment benefits fell to a three-month low last week, aligning with consistent job growth throughout July. James Knightley, chief international economist at ING, noted that the data suggests there is no immediate need for the Federal Reserve to implement another interest rate cut.
While the overall rise in retail sales is a positive sign, it is important to consider that part of the increase may be attributable to price increases resulting from tariffs, rather than solely reflecting higher sales volumes. Retail sales excluding automobiles, gasoline, building materials, and food services increased 0.5 per cent last month, after a downwardly revised 0.2 per cent increase in May. These core retail sales figures closely align with the consumer spending component of gross domestic product.
