Retail Sales Jump

June proved a fabulous month for the consumer though May, after revisions, proved only so so. Flat vehicle sales could not hold back retail sales which jumped a much higher-than-expected 0.6 percent in June, with May revised however 3 tenths lower to plus 0.2 percent. Excluding vehicles, June retail sales surged 0.7 percent as did the key ex-auto ex-gas reading.

Ex-auto ex-gas offers a gauge on underlying trends in consumer spending, a dominant one of which is ecommerce as nonstore retailers popped a 1.1 percent surge in the month which follows even stronger gains in prior months. Department stores, up 0.9 percent, show a big comeback in the month with sporting goods & hobbies strong for a second month. An outsized gain, one that hints at adjustment issues and the risk of a downward revision, is a 3.9 percent surge in building materials & garden equipment, a component that had been lagging.

This report is a major plus for the second-half economic outlook not to mention coming data on the second quarter (sales for April, after the second revision, are at a standout plus 1.2 percent). The job market is healthy and the consumer is alive and spending.

Recent History Of This Indicator:
Weak vehicle sales are expected to headline what otherwise is expected to be respectable strength for the June retail sales report. Forecasters see overall sales inching only 0.1 percent higher but rising a very solid 0.5 percent when excluding vehicles. A major positive once again is certain to come from gasoline stations where sales will be inflated by higher prices. When excluding vehicles and gasoline, sales are expected to rise a still respectable 0.3 percent to extend recent gains. However unimpressive June may prove to be at the headline level, retail sales in April and May were outstanding and should support a solid rise for second-quarter GDP.