Retail sales fell 0.3% m/m in June, far worse than the median consensus forecast which called for a 0.3% gain. Revisions to the month prior were also negative, taking the headline reading down to +1.0% m/m (originally reported as +1.2% m/m).
Sales were also weak after excluding volatile items such as autos, gasoline and building materials, with the core sales reading falling by 0.1% m/m - again much lower than the consensus estimate of +0.5% m/m. Revisions also proved negative, bringing last month's original reading down to +0.8% (previously reported as +1.0% m/m)
"Sales were generally weak across most retailers with 8 out of the 13 subcomponents reporting declines on the month. Weakness was led across furniture (-1.6% m/m), clothing (-1.5% m/m), building materials (-1.3% m/m) and motor vehicles & parts (-1.1% m/m) Meanwhile, sales of electronics (+1.0% m/m), gasoline stations (+0.8% m/m) and general merchandise (+0.7% m/m) recorded decent gains on the month", says TD Economics.
Key Implications
- This was unequivocally a disappointing report, with broad based weakness across the majority of categories. Adding to the disappointment were the downward revisions to the month prior, implying less spending activity than we had previously accounted for.
- From the Fed's perspective, this morning's figures run counter to the improving-economy narrative that is essential for a liftoff in rates. With only a few more months of available data before the FOMC's September meeting, we are going to need a decisive turn in underlying economic momentum very soon if a September liftoff is still going to happen.
- After accounting for the June retail sales figures, our current tracking for second quarter real GDP has been revised lower by 0.2 percentage points to 2.4% (annualized). Having said that, the case for stronger consumer spending in the second half of the year based on rising wages and low fuel prices remains intact.
