Retail Spending Bounced Back In June Despite Record-High Inflation

Retail spending rebounded in June, increasing by 1% despite inflation soaring to a four-decade high. While these numbers are encouraging, they mask a troubling sign that spending in the U.S. economy may be retracting.

On Friday, the Commerce Department released its monthly retail spending statistics and found that estimates of retail and food services sales for June hit $680.6 billion, a 1% increase from May and 8.4% higher than June 2021. Overall sales through the second quarter -- April through June -- were up 8.1% from the same period last year.

Those numbers are not adjusted to inflation, however, meaning they may reflect higher prices more than increased spending by consumers. These figures also come only days after data for the Consumer Price Index showed a 9.1% increase in June, the highest on record in nearly 40 years, and one day after the Producer Price Index showed a 11.3% increase.

Recent inflation hikes have been primarily driven by skyrocketing energy prices as well as higher food prices. Those factors were reflected in the retail spending data as sales at gasoline stations were up 49.1% since June 2021 while food services and drink sales were up 13.4% since the same time.

Economists and analysts are sure to be watching these figures closely to see how consumption patterns are adjusting to much higher inflation. Consumption spending makes up the largest portion of the U.S. economy, meaning a clear slowdown would likely add to concerns that a recession is approaching.

In other sectors of the economy, spending has declined in the face of inflation. Manufacturing output has slowed down since May and home construction has pared back in a market already suffering from a deep imbalance between supply and demand.