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First Cut: June retail sales surprisingly steady after similar increases in May and April

The June data on retail and food sales presented a surprisingly steady picture for the second quarter. The June month-over-month increase was 0.4%, the same as in the revised data for May and April. The data included annual revisions issued on June 25.

Excluding motor vehicles, retail sales were also up 0.4% in June from May after up 0.4% in May and up 0.6% in April. Sales at auto and other dealers were up more than expected with a strong gain of 0.8%.

Sales of building materials rebounded with an increase of 0.5% after two months of declines.

Gasoline sales were down 2.8% in June after the decrease of 0.8% in May. Recent sharp declines in gasoline prices accounted for the fall in the dollar value of sales.

At the “core” — sales excluding motor vehicles, building materials, and gasoline — sales were up 0.7% in June from May, following a solid up 0.7% in May and up 0.5% in April.

Sales were good for nonstore retailers at up 1.7% and restaurants at up 0.9%. There were respectable gains for furniture stores at up 0.5%, probably reflecting increased activity in the housing market. A gain of 0.5% for clothing and accessory stores may have been related to warm weather and demand for seasonal wear. Food and beverage stores also had a gain of 0.5%.

The FOMC will now have solid evidence that consumer spending picked up in the second quarter and will provide support to overall GDP growth. The stronger-than-expected numbers probably won’t derail the anticipated rate cut at the July 30-31 meeting, but it could make the Committee reluctant to signal any further plans to reduce short-term rates in the near future without evidence of a sustained downturn in the economy.

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