U.S. retail sales grow above expectations in June

U.S. retail sales report for the month of June came in stronger than expected, with sales growing further due to a sharp recovery in May. The headline sales rose 7.5 percent sequentially in the month, as compared with consensus expectations of 5 percent. The core sales rose 5.6 percent sequentially. In level terms, headline retail sales have almost recovered to their pre-COVID February level, while core sales have exceeded even their March level.

Overall, today’s report adds to evidence of a better-than-expected initial rebound in consumption spending, likely boosted by pent-up demand and government assistance in the form of economic impact payments and additional unemployment benefits to households.

Like in May and June auto sales data, the retail sales report shows that households are ready to commit to higher expenditures as the economy gradually opens up.

“It remains to be seen if further improvement in spending will be more gradual or whether households will be willing to return to normal spending patterns more rapidly. That said, the June data, which matter more in the estimation of Q3 GDP, set us up for a strong rebound in consumption spending in the third quarter, even if spending from here on remains modest. Overall, we view today's report as consistent with our official Q3 GDP forecast of 27.5 percent q/q saar”, said Barclays in a research report.