US retail sales rose less than expected in June, though consumer spending appeared to be solid, which likely kept the economy afloat in the second quarter.

Retail sales increased 0.2 per cent last month, the Commerce Department said on Tuesday (Jul 18). Data for May was revised higher to show sales gaining 0.5 per cent instead of 0.3 per cent as previously reported.

Economists polled by Reuters had forecast retail sales gaining 0.5 per cent. Retail sales are mostly goods and are not adjusted for inflation. Food services and drinking places are the only services category in the retail sales report.

Spending has remained resilient despite 500 basis points worth of interest-rate hikes from the Federal Reserve since March 2022, when the US central bank kicked off its fastest monetary policy tightening cycle in more than 40 years.

A tight labour market continues to boost wage gains while some households still have savings accumulated during the Covid-19 pandemic. Consumers’ purchasing power is also gradually improving as inflation subsides.

Excluding cars, petrol, building materials and food services, retail sales increased 0.6 per cent in June. Data for May was revised slightly up to show these so-called core retail sales increasing 0.3 per cent instead of the previously reported 0.2 per cent.

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Core retail sales correspond most closely with the consumer spending component of gross domestic product. June’s solid rise and May’s upward revision to core retail sales in May suggest that consumer spending, which accounts for more than two-thirds of the US economy, continued to grow last quarter. The pace was, however, probably slower than the first quarter’s rate, which was the fastest in nearly two years.

Economic growth estimates for the second quarter are currently as high as a 2.3 per cent annualised rate. The economy grew at a 2 per cent pace in the January-March quarter. Reuters