Strong gains for the discretionary categories of autos and restaurants and a big upward revision to May highlight the June retail sales report. Total sales rose an as-expected 0.5 percent in June with May, in what will be a positive for second-quarter GDP estimates, revised a sharp 5 tenths higher to an outsized 1.3 percent jump.
What’s striking is that autos were very strong in both June and May, up 0.9 and 0.8 percent respectively, with restaurants really showing unusual acceleration, up 1.5 and 2.6 percent in the two months. Gains here point to new confidence among consumers and are consistent with the strength underway in the labor market.
Sales at health & personal care stores were unusually strong in June, up 2.2 percent following a series of very strong gains in the 1 percent range. Nonstore retailers, in a sign of e-commerce strength, rose 1.3 percent in June and continue to make ground compared to other components. Gasoline stations, boosted by high gas prices, saw a 1.0 percent rise in June sales following a 3.0 percent spike in May. Building materials, at plus 0.8 percent in June, and furniture store sales, up 0.6 percent, are both positive indications for residential investment.
Consumer spending in May was at first modest overall on weakness in spending on services though today’s upward retail revision will offer a major lift for May’s final result. And unless services prove flat again, June — based on today’s report — should prove a very strong finish for the second-quarter economy.