Solid June Retail Sales Bolsters US GDP Growth Outlook
- Retail strength defies expectations as consumers keep spending - Control group data boosts Q2 GDP tracking ahead of key Fed decisions - Retreating jobless claims points to resilient underlying labour market - Tariff effects, rising prices could test consumer momentum in H2 - Experts
US economic data released Thursday painted a stronger picture of consumer resilience, with retail activity rebounding sharply in June and reducing the urgency for monetary easing.
Figures from the US Census Bureau showed Advance Monthly Retail Sales rose 0.6% in June, well above the 0.1% forecast and reversing a revised 0.9% decline in May. Sales excluding autos and gasoline also gained 0.6%, doubling expectations and improving from a flat print the previous month.
A key input for GDP, the retail control group, rose 0.5%, beating the 0.3% estimate and building on a downwardly revised 0.2% increase in May.
Breaking down the components, the Bureau reported that non-store retailers increased by 4.5% y/y, while food services and drinking places rose 6.6% from June 2024.
“Delayed tariff price increases and steady income growth continue to fuel spending despite weak survey data indicating building concerns by households,” said Ben Ayers, senior economist at Nationwide.
Positive Implications for GDP
The June figures are likely to support the Federal Reserve’s current “wait and see” approach, with few signs that the economy is faltering enough to justify near-term rate cuts.
“After today’s report, we are tracking Q2 real consumption growth at 1.7% (q/q saar), compared to 1.4% previously, with goods up 2.2% and services up 1.4%,” said Morgan Stanley economist Michael Gapen. “This brings our GDP tracking for Q2 to 2.2%, up from 2.1% prior.”
Labour market data also added to the upbeat tone. Initial jobless claims for the week ending 12 July fell to 221,000, the lowest level in three months, continuing the downtrend after a pickup in May.
Source: US Census Bureau
Inflation Still Rising
The positive retail data followed an earlier release showing inflation continuing to firm. Headline CPI rose 2.7% y/y in June, topping the 2.6% consensus and accelerating from May’s 2.4%. Core CPI came in at 2.9% y/y, in line with forecasts and edging up from 2.8%.
Nationwide’s Ayers noted: “Peering through the noise in the trade data, the underlying pace of consumer and business activity has weakened but isn’t anywhere close to signalling a recession. Faster inflation over the second half of 2025 as tariffs pass into prices more readily, as well as continued softening of hiring, should weigh on spending from here despite the positive data for June.”
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- Retail strength defies expectations as consumers keep spending
- Control group data boosts Q2 GDP tracking ahead of key Fed decisions
- Retreating jobless claims points to resilient underlying labour market
- Tariff effects, rising prices could test consumer momentum in H2 - Experts
By Harry Daniels
LiveSquawk News
@HarryDaniels71
17 July 2025 | 15:00 GMT
US economic data released Thursday painted a stronger picture of consumer resilience, with retail activity rebounding sharply in June and reducing the urgency for monetary easing.
Figures from the US Census Bureau showed Advance Monthly Retail Sales rose 0.6% in June, well above the 0.1% forecast and reversing a revised 0.9% decline in May. Sales excluding autos and gasoline also gained 0.6%, doubling expectations and improving from a flat print the previous month.
A key input for GDP, the retail control group, rose 0.5%, beating the 0.3% estimate and building on a downwardly revised 0.2% increase in May.
Breaking down the components, the Bureau reported that non-store retailers increased by 4.5% y/y, while food services and drinking places rose 6.6% from June 2024.
“Delayed tariff price increases and steady income growth continue to fuel spending despite weak survey data indicating building concerns by households,” said Ben Ayers, senior economist at Nationwide.
The June figures are likely to support the Federal Reserve’s current “wait and see” approach, with few signs that the economy is faltering enough to justify near-term rate cuts.
“After today’s report, we are tracking Q2 real consumption growth at 1.7% (q/q saar), compared to 1.4% previously, with goods up 2.2% and services up 1.4%,” said Morgan Stanley economist Michael Gapen. “This brings our GDP tracking for Q2 to 2.2%, up from 2.1% prior.”
Labour market data also added to the upbeat tone. Initial jobless claims for the week ending 12 July fell to 221,000, the lowest level in three months, continuing the downtrend after a pickup in May.
The positive retail data followed an earlier release showing inflation continuing to firm. Headline CPI rose 2.7% y/y in June, topping the 2.6% consensus and accelerating from May’s 2.4%. Core CPI came in at 2.9% y/y, in line with forecasts and edging up from 2.8%.
Nationwide’s Ayers noted: “Peering through the noise in the trade data, the underlying pace of consumer and business activity has weakened but isn’t anywhere close to signalling a recession. Faster inflation over the second half of 2025 as tariffs pass into prices more readily, as well as continued softening of hiring, should weigh on spending from here despite the positive data for June.”