U.S. Retail Sales Jumped as Buyers Flexed Their Muscles
June’s healthy gain points to stronger growth after a sluggish start to 2016
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An employee monitors a check-out area at a Target Corp. store in Mentor, Ohio, in 2014. Photo: Daniel Acker/Bloomberg News
Sales at retail stores and restaurants rose 0.6% in June from the prior month to a seasonally adjusted $456.98 billion, the Commerce Department said Friday. Sales had climbed 0.2% in May, revised down from an earlier estimate of 0.5% growth.
“Consumers continue to push the U.S. economy forward,” PNC Financial Services Group Deputy Chief Economist Gus Faucher said in a note to clients.
Household spending was up broadly last month. Excluding autos, retail sales last month rose 0.7% from May. Excluding both autos and gasoline, sales also climbed 0.7%.
Economists surveyed by The Wall Street Journal had expected headline sales would rise a more modest 0.1% and sales excluding autos would climb 0.4% in June.
Consumer spending strongly rebounded this spring after a slow start to the year. In the second quarter, total retail sales were up 1.4% compared with the first quarter—providing a tailwind for the overall U.S. economy.
Friday’s report was “supportive of our outlook for a consumer-driven bounce back in second quarter growth,” Barclays economist Rob Martin said in a note to clients.
Most retail categories saw sales grow last month, led by a 3.9% jump in sales at building-supply stores. That was the largest one-month increase in the sector since April 2010 and followed a 2.5% drop the prior month and a 1.6% decline in April.
“As we suspected, that earlier weakness was weather-related, with the awful spring in the Northeast temporarily depressing spending,” Capital Economics chief U.S. economist Paul Ashworth said in a note to clients.
Sales of motor vehicles and automotive parts were up 0.1% last month after falling 0.5% in May. Two of the biggest auto makers had earlier reported that the U.S. unit sales pace for cars and light trucks slipped in June from the prior month.
Sales at restaurants and bars were down 0.3% from May and clothing-store sales fell 1.0% in June. More broadly, restaurant sales were up 1% in the second quarter compared with the first three months of 2016.
Yum Brands Inc. Chief Executive Greg Creed said Taco Bell and KFC restaurants have seen “some improvement” in business since early June. “As we all know, in the U.S. the market is a little soft, but I think that we see some momentum in sales,” he told analysts Thursday.
In the first six months of 2016, overall U.S. retail and food services sales were up 3.1% compared with a year earlier. The data weren’t adjusted for price changes, but sales growth comfortably exceeded the recent rate of inflation.
American consumers have continued to shift their spending from brick-and-mortar retailers to online shopping. Sales at so-called nonstore retailers rose 10.6% in the first half of 2016 compared with the first six months of 2015. Department-stores sales fell 3.8% over the same period.
San Francisco-based jeans maker Levi Strauss & Co. this week said it is focusing on international markets and selling its products directly to consumers. “The traditional department store channel is and has been challenged, and that’s a big chunk of our business in the U.S.,” Chief Executive Chip Bergh said.
The pickup in consumer spending in recent months has boosted expectations for overall U.S. economic growth.
“Fortunately, the first-quarter slowdown in household spending appears to have been temporary” and “indicators for the second quarter have so far pointed to a sizable rebound,” Federal Reserve Chairwoman Janet Yellen said in mid-June. “This recovery is a key factor supporting the [Fed’s] expectation that overall economic activity will expand at a moderate pace over the next few years.”
Momentum in the job market has been uneven over the past couple months. Hiring slowed sharply to a meager 11,000 new jobs in May but rebounded to a robust 287,000 in June, according to the Labor Department. The unemployment rate last month was 4.9%, hovering at or slightly below 5% for the ninth straight month.
Still, the tightening labor market is boosting workers’ paychecks and bolstering their spending power. Average hourly earnings of private-sector workers rose 2.6% in June compared with a year earlier, matching the strongest annual growth rate since the summer of 2009.
Write to Ben Leubsdorf at ben.leubsdorf@wsj.com
