Sales fall short of expectations despite strong auto results
After surprising to the upside in May with a 0.6% jump, retail sales continued to climb in June, rising 0.4%, but still fell well short of expectations. Excluding surging automobile sales, June sales were flat.
Despite the disappointing tone of the report, it still held some positive news. Sales of autos and furniture rose nicely, suggesting that consumers are increasingly comfortable making big ticket purchases. Sales over the period of May and June were up 0.9%, a marked improvement over the decline in sales during the same period a year ago.
Although the results are likely to be met with disappointment on Wall Street given the lofty expectations for a more robust increase, retail sales are still trending positively.
Stronger job gains in recent months and rising consumer confidence appear poised to support further growth in spending in the months ahead. Retailers are understandably hopeful that these conditions will support a strong back-to-school shopping season.
A significant missing ingredient to more durable growth is more rapid improvement in personal income. Rising confidence can carry spending higher to a point, but better wage gains supported by robust job creation will be critical at some stage to keep spending afloat.
Investors are keeping a watchful eye on economic data, not only for signs about the direction of the economy, but perhaps more importantly in a search for clues about the Fed’s next steps. With joblessness still elevated and inflation still in check, the Fed is well-positioned to maintain a policy stance that is supportive of the economy for some time. Whether or not they decide to trim their bond purchases at the margins in the months ahead remains to be seen, however, and remains a source of anxiety for the markets.
To see news coverage featuring Jim’s comments, please visit the following site: