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U.S. retail sales rose solidly in June
*Retail sales rose 0.6% in June and 1.3% excluding motor vehicles and parts, well above consensus forecasts, indicating continued solid gains in consumer spending (Chart 1). The monthly data of the various categories of retail sales are bouncing around a lot with big monthly revisions, but the trend is decidedly up.
*Motor vehicle and parts sales fell 2% in June following their 4.6% decline in May, as supply constraints continue to hamper sales (Chart 2). Other categories that faced supply constraints and recorded their second consecutive monthly decline include building materials (-1.6% following -5.2% in May) and furniture, electronics, and appliance stores (-0.9% following -3.6% in May).
*The outstanding gainer was food services and drinking places, which reflects the powerful impact of the reopening of the economy. It rose 2.3% in June and is now up 38% since December (Chart 3).
*The increase in June retail sales confirms the robust quarterly rise in sales in Q2 and raises the starting point for measuring Q3 sales. The control group that is calculated directly in GDP—sales excluding automobiles and building supplies and gas—rose 1.1%, lifting the June level modestly above the Q2 average and boosting the quarterly rise in Q2 to 3.3%.
*Retail sales are less than one-third of total consumption expenditures—over two-thirds is spending on services. Services consumption in June will get an extra boost from consumption of energy services, as suggested by yesterday’s big increase in production of electric and gas utilities reflecting the higher-than-normal temperatures.
Chart 1.
Chart 2.
Chart 3.
Mickey Levy, mickey.levy@berenberg-us.com
Member FINRA & SIPC
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