U.S. retail sales jump in June in sign of consumer health

U.S. retail sales rose at a solid pace last month, providing crucial support to the economy at a time when other drivers of growth have faded.

The Commerce Department said Tuesday that retail sales rose 0.4% in June on seasonally adjusted basis when compared to May, the fourth straight increase. Sales at online retailers, grocery stores, home and garden stores, and at restaurants and bars all increased at a healthy pace. On a year-over-year unadjusted basis, Junes sales were up 3.4 percent.

June’s figures underscore the importance of consumer spending to the U.S. economy. Business investment has weakened, factory output has faltered, and slower global growth is weighing on exports. But measures of consumer confidence remain historically high and June’s retail sales figures suggest that consumer spending, which drives two-thirds of the economy, remains strong.

“The onus falls on American consumers to drive economic growth,” Ksenia Bushmeneva, an economist at TD Economics, said in a research note. “It seems that they are up to this task.”

Steady hiring and modest wage increases, along with low interest rates, have helped fuel greater spending. Sales at auto dealers rose 0.8% in June, the government said.

Excluding volatile gasoline sales, retail sales were even stronger, rising 0.7%. Gas station sales dropped 2.8% in June, because of lower prices.

Retail sales account for about one-third of Americans’ spending, while the other two-thirds are in services.

Manufacturing output recovered a bit in June, rising 0.4%, according to a separate report Tuesday from the Federal Reserve. But factory output still plunged 2.2% in the second quarter, held back by tariffs imposed by governments overseas in retaliation for U.S. tariffs, and by the strong dollar, which makes U.S. goods more expensive overseas.

Even with solid retail sales in June, economists forecast that growth will be weaker in the April-June quarter than in the first three months of the year. Most forecast it slowed to an annual rate of about 2% in the second quarter, down from 3.1% in the first quarter.

So far, consumer spending has remained healthy despite the hefty tariffs imposed on billions of dollars of imports as part of President Trump’s trade fights. Consumers are also defying, for now, fears that their spending would decline as the impact of Trump’s tax cuts wanes.

A category that is mostly made up of online retail sales jumped 1.7% for the second month in a row, pushing the annual gain to 13.4%, a testament to the ongoing strength of online retailers. Spending at restaurant and bars increased 0.9%, a healthy showing in an area that is a discretionary expense. Spending at grocery stores rose 0.5%.