Retail sales in the United States unexpectedly increase in June

WASHINGTON, July 16 (Reuters) – Retail sales in the United States increased unexpectedly in June, as demand for goods remained strong even as spending returned to services, raising expectations of accelerating economic growth in the second trimester.

Retail sales rebounded 0.6% last month, the Commerce Department said on Friday. Data for May has been revised down to show sales down 1.7% instead of 1.3% as previously reported.

Economists polled by Reuters were forecasting a drop in retail sales of 0.4%. But motor vehicle shortages due to a global semiconductor shortage, which undermine production, hamper auto sales.

Sales of some household appliances have also been affected by the chip shortage.

“We expect supply issues and dwindling car inventories to continue to constrain car sales over the next few months,” said Veronica Clark, economist at Citigroup in New York.

Demand shifted to goods like electronics and motor vehicles during the pandemic as millions of people worked from home, took online classes and avoided public transportation.

Spending now falls on services such as travel and entertainment, with at least 160 million Americans fully vaccinated against COVID-19. Retail sales are mostly goods, with services such as health care, education, travel and hotel accommodation making up the remaining part of consumer spending.

Restaurants and bars are the only category of services in the retail sales report.

Excluding autos, gasoline, building materials and food services, retail sales rose 1.1% last month after declining 1.4% in May. These so-called basic retail sales correspond most closely to the consumer expenditure component of gross domestic product. They were previously estimated to have fallen 0.7% in May.

“With the reopening of the economy, spending on services has started to rise and may divert some spending from goods to certain services that are not captured in the retail sales report,” Kevin Cummins, Chief Economist from the United States at NatWest Markets in Stamford, Connecticut.

Economists expect consumer spending, which accounts for more than two-thirds of US economic activity, to post double-digit growth in the second quarter. Consumer spending grew at an annualized rate of 11.4% in the first quarter.

Households have accumulated at least $ 2.5 trillion in excess savings during the pandemic, which is expected to boost spending this year and beyond. From July to December, some households will receive income under the Expanded Child Tax Credit program, which will soften the blow of an early termination of government-funded unemployment benefits in at least 24 states.

Gross domestic product growth estimates for this quarter are around 9%, which would represent an acceleration from the 6.4% pace recorded in the first quarter. Economists estimate that the economy could grow at least 7% this year. It would be the fastest growing since 1984. The economy contracted 3.5% in 2020, its worst performance in 74 years.

Reporting by Lucia Mutikani; Editing by Dan Burns

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