NEW YORK (AP) — Consumers increased their spending from May to June, underscoring their resilience despite painfully higher prices at gas stations and in supermarket aisles and allaying fears that the economy could be on the brink of collapse. a recession
US retail sales rose 1% in June, from a revised 0.1% drop in May, the Commerce Department said on Friday.
The figures are not adjusted for inflation and therefore largely reflect higher prices, particularly for gasoline. But they also show that consumers are still providing crucial support to the economy and spending on discretionary items such as furniture, restaurant meals and sporting goods.
At the same time, last month’s spending increase is modest enough that it probably won’t encourage the Federal Reserve to raise interest rates even more aggressively. Stock prices rose after the report was released.
“People did not give in to the shock of Ukraine and the subsequent rise in food and energy prices,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “Instead, they spent a small portion of their pandemic savings to maintain their discretionary spending.”
Consumers still have significant savings, on average, buoyed by pandemic-era government relief checks and strong salary and hiring gains. JPMorgan executives said Thursday that their customers are still pulling out their credit and debit cards at a healthy pace.
Kathy Bostjancic, chief US economist at Oxford Economics, said that excluding inflation, retail sales still rose about 0.3% in June, down from a 0.4% contraction in May. She expects the economy to grow at a slim 0.5% annual rate in the April-June quarter, after contracting in the first three months of the year.
The report showed consumers’ continued appetite for non-essential items like appliances and furniture. In fact, sales at furniture stores were up 1.4%, while consumer electronics stores were up 0.4%. Online sales showed a resurgence, posting a 2.2% increase. Restaurant business increased 1%. But department stores took a hit, posting a 2.6% decline.
Solid spending came even as buyers faced high prices in all areas. US inflation rose to a new four-decade high in June on rising gas, food and rent prices, squeezing household budgets and pressuring the Federal Reserve to raise rates. aggressively, trends that increase the risk of a recession.
The government’s consumer price index soared 9.1% in June compared to a year ago, the biggest annual increase since 1981, with nearly half the increase due to higher energy costs. The year-over-year jump in consumer prices last month followed an 8.6% annual jump in May. From May to June, prices rose 1.3%, following a 1% increase from April to May.
Some economists believe that inflation could be reaching a peak in the short term. Gasoline prices, for example, have fallen from $5 a gallon hit in mid-June to an average of $4.57 nationwide on Thursday, still much higher than a year ago.
Accelerating inflation is also a big problem for the Fed. The central bank is already engaged in the fastest series of interest rate hikes in three decades, which it hopes will tame inflation by reducing borrowing and consumer spending. and companies.
The retail sales report covers about a third of total consumer spending and does not include services, such as haircuts, hotel stays and airline tickets.
Rugaber contributed from Washington.