The latest data released by the US Department of Commerce on July 16 shows that despite a boost from the World Cup attracting global tourists and major e-commerce promotional events, US retail sales in June only increased by 0.2% month-on-month, performing weaker than market expectations. This figure marks a significant slowdown compared to the revised 1% growth in May and falls short of the 0.3% increase predicted by economists surveyed by data analysis firm FactSet.
Analysts point out that while core consumer demand remained resilient during the month, diverging trends are becoming increasingly pronounced. Furthermore, uncertainties in energy prices stemming from international geopolitical conflicts are raising concerns for US consumer spending growth in the second half of the year.
Breaking down the data by industry, online retail and motor vehicle sales stood out, both posting a 1.9% month-on-month increase. The growth in online spending was primarily driven by promotional events like Amazon's Prime Day. However, dragged down by falling fuel prices, sales at gasoline stations plunged 5.3%, becoming the main factor weighing on the overall figure. Sales at health and personal care stores also declined by 0.8% month-on-month. Notably, despite the influx of international tourists due to the World Cup, sales at restaurants and bars, as well as department stores, each saw only a minimal increase of 0.1% last month. Excluding the more volatile categories of building materials and gasoline, core US retail sales in June grew by 0.5% month-on-month, slightly above the market consensus of 0.4%, indicating that underlying consumer demand is still holding up.
Regarding the current macroeconomic trajectory, Ellen Zentner, Chief US Economist at Morgan Stanley Wealth Management, noted in a commentary that despite facing multiple challenges, US consumers are continuing to spend, and the labor market shows no signs of deterioration. She emphasized that such data will not alter the Federal Reserve's current policy path but further underscores the ongoing resilience of the US economy.
Personal consumption expenditures, which account for about two-thirds of the US economy, have shown some resilience this year, but structural risks at the macro level are accumulating. Economists interviewed indicate that as employment market gains primarily flow to higher-income groups, while lower-income households are being squeezed by high prices and increasing debt, the US is exhibiting a "K-shaped" economic pattern where the rich get richer and the poor get poorer.
Looking ahead to the second half of the year, Oliver Allen, Senior US Economist at Pantheon Macroeconomics, warned in an analysis report that as the boost to cash flow from tax refunds gradually fades, US consumer spending is likely to face a new round of slowdown in the latter part of the year. He stressed that if conflicts in the Middle East persist, preventing energy prices from returning to pre-conflict levels, consumers will be directly exposed to the impact of surging oil prices eroding their real incomes, creating significant uncertainty about their future willingness to spend. Given this, before considering restarting interest rate cuts, the Federal Reserve will still need to see inflation convincingly move back toward its 2% annual target or observe clearer signs of an economic slowdown.
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