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The Retail Sales June Jump

Posted by Joseph Trevisani on Jul 15, 2016 4:48:10 PM

The American consumer returned to spending form in June giving the second quarter the strongest retail sales numbers in more than three years. 

Sales rose 0.6 percent in the month exceeding the 0.1 percent forecast and better than the highest estimate in the Bloomberg survey. This unexpected jump followed negative revisions to the two prior months, May to 0.2 percent from 0.5 percent and April to 1.2 percent from 1.3 percent, according to the Commerce Department on Friday.  Even with the adjustments the 0.67 percent average gain in April, May and June was the highest since the 0.83 percent average for third quarter of 2012. 

Retail Purchases rose 2.7 percent in June over the previous 12 months from 2.2 percent in May.  

Core sales, also call the ‘retail sales control group’ the category used to calculate the consumption component of gross national product, rose 0.5 percent beating the 0.3 percent prediction. The May figure was revised 0.1 percent higher to 0.5 % percent.  The quarterly average of 0.67 for core sales was the highest since the first quarter of 2012. 

Largely due to these results the Atlanta Fed GDPNow tracking model for the second quarter rose to 2.4 percent from 2.3 percent on July 12th.

Payrolls also reigned strength in June adding 287,000 jobs after averaging just 77,500 in April and May, which may have emboldened consumers.  Annual average hourly earnings rose to 2.6 percent, the best yearly increase since last December. Consumption accounts for about 70 percent of U.S. economic activity. 

Sales minus automobile purchases gained 0.7 percent in June, almost double the 0.4 percent forecast. The annual gain rose to 3.2 percent from 2.7 percent. Vehicle sales rose a modest 0.1 percent in June after falling 0.5 percent in May. 

Eleven of 13 major categories had stronger demand in June from the prior month. The largest gain was in building materials and garden supplies which rose 3.9 percent more than offsetting May’s 2.5 percent drop. Online sales rose 1.1 percent, sporting goods stores saw a 0.8 percent gain and health and personal care outlets had a 0.7 percent gain. 

Retail sales figures are not corrected for inflation. Gasoline station receipts rose 1.2 percent in June but as the price of a gallon of regular fuel dropped four cents on the month, the increase reflects the advent to the summer driving season and rising consumption. 

In a separate report the Federal Reserve noted that industrial production rose 0.6 percent in June, twice the forecast and May's decline was reduced to 0.3 percent from 0.4 percent.  

Capacity utilization climbed to 75.4 percent in June from 74.9 percent the previous month, considerably better than the 75.1 percent forecast.  It was the highest reading since February. 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

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