US Retail Sales Remain Unchanged in June Following May's Increase

U.S. retail sales remained unchanged in June, indicating a robust underlying trend that may enhance economic growth projections for the second quarter. The Commerce Department's Census Bureau reported that this flat reading followed a revised 0.3% increase in May, defying economists' expectations of a 0.3% decline. Despite the stable sales figures, the overall outlook appears grim as consumers become increasingly price-sensitive, prioritizing essential goods over discretionary spending. Major retailers and manufacturers have noted a shift in consumer behavior, with PepsiCo CEO Ramon Laguarta highlighting that lower-income households are feeling financial strain and are carefully managing their budgets. Many families have depleted the excess savings accrued during the COVID-19 pandemic and are now facing rising credit card debt amid elevated interest rates. Additionally, wage growth is slowing as the labor market shows signs of cooling, further impacting consumer spending power. Despite these challenges, consumer spending remains strong enough to support ongoing economic expansion. Core retail sales, which exclude automobiles, gasoline, building materials, and food services, rose by 0.9% in June, following a 0.4% increase in May. These core sales figures are closely aligned with the consumer spending component of gross domestic product (GDP). Prior to the release of the retail sales data, growth estimates for the April-June quarter were projected at around 2%, following a 1.4% growth rate in the first quarter. The latest figures suggest that while challenges persist, the economy is on a stable growth trajectory.