Strong Retail Sales Report Suggests Upside Risks To Consumption Outlook

June's advance retail sales report was much stronger than expected, including positive revisions to prior data, suggesting continued strength in consumption at the end of Q2.

• Overall retail sales saw flat (-0.02% unrounded) growth M/M, slower than the +0.3% registered in May (upward rev from 0.1%) , but above the -0.3% expected. Sales ex-autos (+0.4% vs 0.1% expected) and ex-auto/gas (+0.8% vs +0.2% expected) impressed, and also with higher revisions.
• Closely-watched Control Group sales rose 0.9%, far exceeding the 0.2% expected and up from 0.4% in May. The 0.86% unrounded was a shade slower than March's 0.87%, but basically the joint-highest rate of growth in 14 months.
• That was enough to bring the 3M/3M annualized rate of Control Group growth from 2.6% in May to 3.3% in June, the highest since January 2024, and well up from the 1.3% low in March which had marked the weakest pace of momentum since late 2021.
• As the headline figure suggests, gasoline and auto sales were a big drag, falling 3.0% and 2.0% respectively (and for reasons including price deflation and in the case of auto dealers, a major cyberattack), but outside of those and sporting goods (-0.1%), there were no declines in any other categories.
• This includes impressive growth in non-store retail sales (+1.9%) and building materials (+1.4%), with other large categories including health/personal care and food services/drinking places posting solid growth.
• With prices in deflation in June, this marks a very strong report in real terms that - combined with upward revisions - points to an upward consideration of GDP growth estimates in Q2 (Atlanta Fed's GDPNow latest estimate = 2.0%).