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Wednesday, August 17, 2022

Retail sales up 1% in June, fears of recession lower

Consumers raised their spending from May to June, underscoring their resilience despite painfully high prices at gas pumps and grocery aisles and allaying fears that the economy could be on the verge of recession.

US retail sales rose 1% in June, from a revised decline of 0.1% in May, the Commerce Department said on Friday.

The figures are not adjusted for inflation and therefore largely reflect higher prices, especially for gas. But they also show that consumers are still providing significant support to the economy and spending on discretionary items such as furniture, restaurant food and sporting goods.

Plus, last month’s spending gains are so modest that it won’t encourage the Federal Reserve to raise interest rates even more aggressively. Stock prices rose after the release of the report.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: “People did not turn around in the face of Ukraine’s shock and subsequent hikes in food and energy prices.” “Instead, he ran a small portion of his pandemic savings down to keep up with his discretionary spending.”

Consumers still have significant savings, on average, buoyed by pandemic-era government relief checks and strong hiring and wage benefits. JPMorgan executives said Thursday that their customers are still breaking their credit and debit cards at a healthy pace.

Cathy Bosjanic, chief US economist at Oxford Economics, said retail sales still rose about 0.3% in June, excluding inflation, from a contraction of 0.4% in May. He expects the economy to grow at a 0.5% annual rate in the April-June quarter after shrinking in the first three months of the year.

The report shows the ongoing hunger of consumers for non-essentials like gadgets and furniture. In fact, sales at furniture stores rose 1.4%, while consumer electronics stores rose 0.4%. Online sales showed a resurgence, registering a growth of 2.2%. Business at restaurants was up 1%. But department stores took a hit, posting a 2.6% drop.

The solid figures bodes well for the back-to-school shopping season, which is the second largest sales period after the winter holidays. MasterCard Spending Pulse, which tracks spending across all payment forms, including cash, estimates that back-to-school spending will increase by 7.5% from July 14 to September 5, when sales were up 11%.

But the cost is volatile. The latest round of retail earnings reports released in May showed some moderation in spending, especially with low-income shoppers. RH, an upscale furniture chain, last month cut its sales outlook for last year, pointing to deteriorating macro-economic conditions. It cited higher mortgage rates, which are slowing sales of luxury homes, to indicate that wealthy buyers are also pulling back.

Nevertheless, the overall tangible spending came even as shoppers faced higher prices across sectors. US inflation hit a new four-decade high in June as rising gas, food and rent prices, squeezing the household budget and pressing the Fed to aggressively raise rates – trends that raise recession risks .

The government’s consumer price index rose 9.1% in June from a year earlier, the biggest annual increase since 1981, with nearly half the increase due to higher energy costs. The year-on-year jump in consumer prices last month followed an 8.6% annual jump in May. Prices rose 1.3% from May to June, followed by a 1% increase from April to May.

Some economists believe that inflation may hit a short-term peak. For example, gas prices fell from $5 per gallon in mid-June to an average of $4.57 nationwide on Thursday — still far higher than a year ago.

World Nation News Desk
World Nation News Deskhttps://worldnationnews.com/
World Nation News is a digital news portal website. Which provides important and latest breaking news updates to our audience in an effective and efficient ways, like world’s top stories, entertainment, sports, technology and much more news.
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