AP

Retail sales up 1% in June, easing fears of a recession

Jul 15, 2022, 5:50 AM | Updated: Jul 17, 2022, 9:51 pm

NEW YORK (AP) — Consumers picked up their spending from May to June, underscoring their resilience despite painfully higher prices at the gas pump and in grocery aisles and allaying fears that the economy might be on the verge of a recession.

U.S. retail sales rose 1% in June, from a revised decline of 0.1 % in May, the Commerce Department said Friday.

The figures aren’t adjusted for inflation and so largely reflect higher prices, particularly for gas. But they also show that consumers are still providing crucial support for the economy and spending on such discretionary items as furniture, restaurant meals and sporting goods.

At the same time, last month’s spending gain is modest enough that it likely won’t encourage the Federal Reserve to raise interest rates even more aggressively. Stock prices rose after the report’s release.

“People did not fold in the face of the Ukraine shock and the subsequent surge in food and energy prices,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “Instead, they ran down a small part of their pandemic savings in order to keep up their discretionary spending.”

Consumers still have significant savings, on average, bolstered by pandemic-era government relief checks and strong hiring and pay gains. JPMorgan executives said Thursday that their customers are still breaking out their credit and debit cards at a healthy pace.

Kathy Bostjancic, chief U.S. economist at Oxford Economics, said that excluding inflation, retail sales still rose about 0.3% in June, up from a contraction of 0.4% in May. She expects the economy to grow at a slim 0.5% annual rate in the April-June quarter, after shrinking in the first three months of the year.

The report showed consumers’ ongoing appetite for non-essentials like gadgets and furniture. In fact, sales at furniture stores rose 1.4%, while consumer electronics stores rose 0.4%. Online sales showed resurgence, posting a 2.2% increase. Business at restaurants was up 1%. But department stores took a hit, posting a 2.6% decline.

The solid figures bold well for the back-to-school shopping season, the second largest sales period behind the winter holidays. Mastercard SpendingPulse, which tracks spending across all payment forms including cash, forecasts that back-to-school spending will be up 7.5% from July 14 through Sept. 5 compared with the year-ago period when sales rose 11%.

But spending is volatile. The latest round of retail earnings reports released in May showed some slowing of spending, particularly with low-income shoppers. RH, an upscale furniture chain, cut it sales outlook for the year last last month, pointing to deteriorating macro-economic conditions. It cited higher mortgage rates, which are slowing sales of luxury homes, indicating that even wealthy shoppers are pulling back.

Nevertheless, the overall solid spending came even as shoppers were confronted with high prices in all areas. U.S. inflation surged to a new four-decade high in June because of rising prices for gas, food and rent, squeezing household budgets and pressuring the Fed to raise rates aggressively — trends that raise the risk of a recession.

The government’s consumer price index soared 9.1% in June compared with a year ago, the biggest yearly increase since 1981, with nearly half of the increase due to higher energy costs. The year-over-year leap 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 inflation might be reaching a short-term peak. Gas prices, for example, have fallen from $5 a gallon reached in mid-June to an average of $4.57 nationwide Thursday — still far higher than a year ago.

Arie Kotler, chairman, president and CEO of Arko Corp., one of the largest operators of convenience stores in the U.S., believes that if gas prices keep coming down “people will have more money in their pocket to spend inside the store.” The chain, located mostly in rural and small towns, continues to offer deals on coffee and food like $1.99 for a slice of pizza.

Accelerating inflation is a big problem for the Fed, too. The central bank is already involved in the fastest series of interest rate hikes in three decades, which it hopes will tame inflation by tamping down borrowing and spending by consumers and businesses.

The retail sales report covers about a third of overall consumer spending and doesn’t include services, such as haircuts, hotel stays and plane tickets.

_____

Rugaber contributed from Washington.

____

Follow Anne D’Innocenzio: http://twitter.com/ADInnocenzio

Follow Chris Rugaber: http://twitter.com/ChrisRugaber

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Tracy Toulou...

Associated Press

How to tackle crime in Indian Country? Empower tribal justice, ex-Justice Department official says

A recently retired director of the Justice Dept. says the federal government hasn't given tribal justice systems equal recognition.

13 hours ago

Speaker of the House Mike Johnson...

Associated Press

House Speaker Mike Johnson says he will push for aid to Israel and Ukraine this week

House Speaker Mike Johnson said Sunday he will try to advance wartime aid for Israel this week, along with funding for Ukraine.

14 hours ago

President Joe Biden speaks at a campaign rally Saturday, March 9, 2024, at Pullman Yards in Atlanta...

Associated Press

US shoots down ‘nearly all’ Iran-launched attack drones as Biden vows support for Israel’s defense

Joe Biden cut short a weekend stay at his beach house to meet with his national security team as Iran launched an attack against Israel.

2 days ago

Protesters in Phoenix shout as they join thousands marching around the Arizona state Capitol after ...

Associated Press

Abortion ruling supercharges Arizona to be an especially important swing state

A ruling this week instituting a near-total abortion ban supercharged Arizona's role, turning it into the most critical battleground.

3 days ago

Former President Donald Trump, center, appears in court for his arraignment, Tuesday, April 4, 2023...

Associated Press

Manhattan court searching for jurors to hear first-ever criminal case against a former president

Jury selection is set to start Monday in former President Donald Trump's hush money case — the first trial of the presumptive nominee.

3 days ago

Follow @ktar923...

Sponsored Content by Condor Airlines

Condor Airlines can get you smoothly from Phoenix to Frankfurt on new A330-900neo airplane

Adventure Awaits! And there's no better way to experience the vacation of your dreams than traveling with Condor Airlines.

Sponsored Articles

...

DESERT INSTITUTE FOR SPINE CARE

Desert Institute for Spine Care is the place for weekend warriors to fix their back pain

Spring has sprung and nothing is better than March in Arizona. The temperatures are perfect and with the beautiful weather, Arizona has become a hotbed for hikers, runners, golfers, pickleball players and all types of weekend warriors.

...

Fiesta Bowl Foundation

The 51st annual Vrbo Fiesta Bowl Parade is excitingly upon us

The 51st annual Vrbo Fiesta Bowl Parade presented by Lerner & Rowe is upon us! The attraction honors Arizona and the history of the game.

(KTAR News Graphic)...

Boys & Girls Clubs

KTAR launches online holiday auction benefitting Boys & Girls Clubs of the Valley

KTAR is teaming up with The Boys & Girls Clubs of the Valley for a holiday auction benefitting thousands of Valley kids.

Retail sales up 1% in June, easing fears of a recession