U.S. retail sales disappoints in June, consumption seems to slowdown closer to 2 pct mark

The advance Census Bureau report showed that U.S. retail sales dropped 0.2 percent in June, below consensus expectations of a rise of 0.1 percent. May’s sales were upwardly revised to a drop of 0.1 percent from 0.3 percent. Sales excluding autos also dropped 0.2 percent, as receipts at motor vehicle and parts dealers were greatly flat in line with weak performance in auto sales in the month. Gasoline station purchases dropped 1.3 percent on lower prices, with sales excluding autos and gas down a weaker 0.1 percent but still below the flat reading anticipated, noted TD Economics in a research report.

Stripping autos, gas, food services and building materials, the ‘control group’ dropped 0.1 percent on the month, coming in below the flat reading expected. Sales in the control group were weighed down by miscellaneous, sporting goods and department stores. These were more than countered by rises in non-store and e-commerce retailers, general merchandise, and health & personal care stores.

The subdued retail sales figure in June is dismaying as far as the resilience of the consumer is concerned, stated TD Economics. Even if the slight upward revision to May helps counter some of the bleakness in the June print and some of the softness in the headline can be linked to the subdued price backdrop leaving the second quarter GDP estimate greatly unchanged near 3 percent, the story is less positive as far as momentum heading into the third quarter, said TD Economics.

Given the weak print in the control group, consumption seems to be slowing closer to the 2 percent mark heading into the third quarter. The softness in retail sales and CPI report is expected to be a main topic for discussion when the Fed meets at the end of the month.

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