NEW YORK — Shoppers paused their spending in June from May, defying economic forecasts for a pullback and proving their resilience in the face of an uncertain economy
Retail sales were unchanged in June from May, after being revised upward to a 0.3% increase in May, according to the Commerce Department. Last month, April sales were revised downward — a 0.2% decline, from unchanged. Sales rose 0.6% in March and 0.9% in February. That comes after sales fell 1.1% in January, dragged down in part by inclement weather.
Sales at gas stations and auto dealerships weighed down the figure. Excluding gas prices and auto sales, retail sales rose 0.8%. Sales at gas stations were down 0.3%, while business at auto stores fell 0.2%, as dealerships were disrupted by a multiday outage after cyberattacks on a software supplier.
The snapshot offers only a partial look at consumer spending and doesn’t include many services, including travel and hotel lodges. But the lone services category – restaurants – registered an uptick of 0.3%.
Elsewhere, plenty of areas were strong. Online sales rose 1.9%, while clothing and accessories store sales rose 0.6%. Department stores posted a 0.6% increase. Stores selling building materials and garden supplies rose 1.4%.
Control retail sales, which excludes food service and drinking places, auto dealers, gas stations, construction material and garden supply stores, and a few other volatile categories, and which goes into the calculation of nominal gross domestic product, rose a solid 0.9% in the month.
Government retail data isn’t adjusted for inflation, which declined 0.1% from May to June, according to the latest government report. High inflation helps to inflate retail sales figures.
“This was a legitimately strong report and inconsistent with a consumer who is on the brink of collapse,” Richard de Chazal, a macro analyst at William Blair, wrote in a report. “This spending is being driven by still positive (though moderating) real income growth, from a consumer that is still widely employed.”
But he added that spending is inconsistent with a host of retailers still seeing more value-conscious consumers who are trading down and generally more thoughtful about their purchases. He also said lower-income consumers, having spent their pandemic savings, are increasingly using credit cards to maintain consumption, resulting in higher delinquency rates and falling levels of confidence, as inflation has moderated along with real income growth.
Federal Reserve Chair Jerome Powell said Monday that the Federal Reserve is becoming more convinced that inflation is headed back to its 2% target and said the Fed would cut rates before the pace of price increases actually reached that point.
Last week, the government reported that consumer prices declined slightly from May to June, bringing inflation down to a year-over-year rate of 3%, from 3.3% in May. June marked a third straight month of cooling deflation, a sign that the worst price spike in four decades is steadily fading and may soon bring in interest rate cuts by the Federal Reserve.
So-called “core” prices, which exclude volatile energy and food costs and often provide a better read of where inflation is likely headed, climbed 3.3% from a year earlier, below 3.4% in May.
Meanwhile, America’s employers delivered another healthy month of hiring in June, adding 206,000 jobs and once again underscoring the U.S. economy’s ability to withstand high interest rates.
The retail sales report comes as there’s been some upheaval in the retail landscape.
Earlier this month, the parent company of Saks Fifth Avenue agreed to buy upscale rival Neiman Marcus Group, which owns Neiman Marcus and Bergdorf Goodman stores, for $2.65 billion, with online behemoth Amazon holding a minority stake.
The new entity will be called Saks Global, creating a luxury powerhouse at a time when the arena has become increasingly fragmented with different players, from online marketplaces that sell luxury goods to upscale fashion and accessories brands opening up their own stores.
Macy’s announced on Monday it was terminating its monthslong buyout talks with two investment firms, citing a substandard offer and the lack of certainty over financing. The department store chain alleged that Arkhouse Management and Brigade Capital didn’t disclose the highest purchase price they were prepared to pay.
Macy’s said it will focus on its own turnaround efforts. That previously unveiled plan includes closing 150 Macy’s stores over the next three years and upgrading the remaining 350 stores.
And grocery chain Stop & Shop, squeezed by rivals like Walmart and Aldi, said Friday it will close 32 underperforming grocery stores in the Northeast by the end of the year.