Consumer spending ramped up in June sending retail sales up 0.5% in line with economists’ predictions. Total sales, including food, as reported by the U.S. Census Bureau were $506.8 billion. Sales were up 6.6% from June 2017. Through the first half of this year retail sales totaled $2.922 trillion, up 5.5% over the same period last year.
Robust auto sales, along with furniture, building supplies and apparel were partly responsible for the gains. Online sales are the biggest growth category year-over-year rising 10% to $315.62 billion though the first half of this year. Gas stations also fared well with sales rising 13.9% through the first half of this year thanks primarily to higher fuel prices.
All retail categories are positive year-over-year for growth with the exception of sporting goods, hobby, music and book stores which report overall sales down 1.7% from the same period last year. Even with declining prices for electronics, stores in this category managed to grow sales by 2.1% through the first six months of this year compared with 2017.
Restaurant sales through June total $352.882 billion, up 4.8% year-over-year. Grocery stores saw sales rose 3.9% to $325.6 billion compared with the first half of last year. Department stores reported flat sales through June totaling $66.732 billion. Apparel and accessory sales rose to $124.463 billion, up 5.1% from the same six months last year.
Federal Reserve Chairman Jerome Powell recently said the economy looks to have expanded at a solid pace through the first half of this year. The firm footing of the U.S. economy has led to two interest rate hikes this year and two more likely in the next six months.
The strong June sales metrics were viewed as a positive sign for the overall economy and a solid end to the second quarter. This month the U.S. economy enters its 10th year of positive growth, one of the longest economic cycles in history. Through June this period of economic expansion has been underway since June 2009. Only one other time in history has the U.S. had longer periods of economic expansion — 120 months during the dot.com bubble which ended in March 2001.
Economists with Wells Fargo recently revised their GDP forecast upward for the second quarter. They expect GDP to grow at 4.7% in the second quarter helping to hoist the full-year growth projections to 3.1%, up from 2.8% previously estimated.
John Silvia, chief economist with Wells Fargo, said a resilient pace of hiring underlines the strength of the economy through the first half of 2018. Wells Fargo reports employers added another 213,000 jobs in June, which was in line with the first half of the year and up from the an average of 182,000 in 2017. Silvia said earnings growth pushed incomes upward to a 6.4% annualized rate to the second quarter.
He said strong labor metrics and accumulated savings from recent tax changes should keep consumers spending in the second half of the year at about the same pace seen in the first six months. Wells Fargo said escalating trade tensions can present some risks to the outlook. That said, Silvia notes capital spending is holding up and remains supportive of growth.
Silva said uncertainty surrounding U.S. and retaliatory tariffs has made pricing and sourcing more challenging, risking future investment and disruptions to already-tight supply chains. With capacity increasingly constrained, input costs are rising. He said GDP projections for the year remains at 3.1%, and the shifting trade winds have not yet blown that off course. He expects the trade deficit will narrow and add more than one percentage point to topline GDP growth in the second quarter.
“We expect the lift to be short lived, however, and for trade to be a drag over the second half of the year. Thus far U.S. tariffs have been targeted at intermediate products, and solid consumer spending points to import growth picking up in the second half of the year,” Silvia noted.