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Retail sales exceed expectations in June

Retail sales remained steady in June, contrary to Wall Street’s forecast of a decline amidst signs of a slowing US economy. Economists had predicted a 0.3% drop in spending, according to Bloomberg data. However, retail sales for May were revised upward to show a 0.3% increase, from a previously reported 0.1% rise, based on Census Bureau data.

Sales for June, excluding autos and gas, rose by 0.8%, surpassing the consensus estimate of a 0.2% increase. The control group in Tuesday’s report, which excludes several volatile categories and is a key input for the Gross Domestic Product calculation, increased by 0.9% in June, exceeding expectations for a 0.2% rise.

“Although retail sales were unchanged in June, the strong 0.9% month-over-month rise in control group sales should ease concerns about the consumer’s situation despite the renewed slump in sentiment,” Capital Economics’ chief North America economist Paul Ashworth wrote in a note to clients. “Admittedly, both second-quarter consumption and GDP growth still appear to have been no better than 2% annualized, but the strong gain in June sets up for a better third-quarter performance.”

The gains were led by nonstore retailers, which saw a 1.9% increase. The largest decline occurred at gasoline stations, where sales dropped 3%. Motor vehicle and parts dealers also experienced a 2% decline. This update on consumer spending comes amid a cooling but still growing US economy. The latest data, along with better-than-expected inflation readings, have led markets to widely anticipate the Federal Reserve’s first interest rate cut by the end of its September meeting.

In an interview at the Economic Club of Washington on Monday, Federal Reserve Chair Jerome Powell declined to specify when the Fed might begin its easing cycle. “I’m not going to be sending signals on any particular meeting,” he said. “We are going to make these decisions meeting by meeting based on evolving data and the balance of risks.”

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