US Sees Surprise Retail Sales Increase In June

Against expectations, US retail sales rose in June, the Commerce Department said Friday, with shoppers stepping up purchases at department stores and electronics outlets as pandemic business restrictions ease.

Sales rose 0.6 percent last month to $621.3 billion, beating forecasts for a decline after they fell by a downwardly revised 1.7 percent in May, the data said.

Sales jumped the most at department stores, electronics and appliance retailers and clothing outlets, as well as at gas stations, likely a consequence of rising oil prices and an increase in domestic travel.

Motor vehicle and parts dealers, however, saw a two percent fall in sales amid soaring used car prices and a shortage of semiconductors that's forced some manufacturers to idle assembly lines.

"Core" retail sales excluding gas stations and the auto sector rose 1.1 percent.

"To see core sales rising so strongly in June is a positive sign that consumers feel confident and are still cash-rich, in aggregate," said Ian Shepherdson of Pantheon Macroeconomics.

Government stimulus payments combined with an easing of Covid-19 business restrictions has pushed retail sales higher in recent months, though the growth has been uneven.

Gas stations saw sales rise 2.5 percent, electronics and appliance stores 3.3 percent and general merchandise stores climbed 1.9 percent -- within which department stores grew 5.9 percent.

Food service and drinking places -- comprising the bars and restaurants that were hardest hit by business restrictions meant to stop Covid-19 -- saw sales increase 2.3 percent last month.

On top of the decline in auto sales, furniture and home furnishing stores saw a decline of 3.6 percent, building materials and gardening equipment outlets lost 1.6 percent and sporting goods and hobby retailers lost 1.7 percent.

Gregory Daco of Oxford Economics called the overall increase "modest" and said it reflected shifts in consumer preferences during the summer months.

"The great spending rotation saw households cut back on furniture, autos, sporting equipment and building material -- categories that outperformed during the pandemic -- while spending more freely at restaurants and bars, gas stations and electronic stores," he said.

Shepherdson said it remains to be seen how Americans will chose to spend the massive $2.3 trillion in savings they have accumulated during the pandemic, thanks in part to the stimulus measures, and whether it will keep retail sales moving higher.

"In the absence of any prior experience remotely like the current situation, this is impossible to forecast with confidence. But we continue to think its implausible to argue that people will choose to hold all the cash and rely solely on regular income to finance all their spending," he said.