Baltimore Sun

Retail sales rise 1% in June to ease fears of recession

Consumer spending picked up despite continued climb of gas, grocery prices

- By Anne D’Innocenzio and Christophe­r Rugaber

NEW YORK — Consumers picked up their spending from May to June, underscori­ng their resilience despite painfully higher prices at the gas pump and in grocery aisles and allaying fears that the economy might be on the verge of a recession.

U.S. retail sales rose 1% in June, from a revised decline of 0.1% in May, the Commerce Department said Friday.

The figures aren’t adjusted for inflation and so largely reflect higher prices, particular­ly for gas. But they also show that consumers are still providing crucial support for the economy and spending on such discretion­ary items as furniture, restaurant meals and sporting goods.

At the same time, last month’s spending gain is modest enough that it likely won’t encourage the Federal Reserve to raise interest rates even more aggressive­ly. Stock prices rose after the report’s release.

“People did not fold in the face of the

Ukraine shock and the subsequent surge in food and energy prices,” said Ian Shepherdso­n, chief economist at Pantheon Macroecono­mics. “Instead, they ran down a small part of their pandemic savings in order to keep up their discretion­ary spending.”

Consumers still have significan­t savings, on average, bolstered by pandemic-era government relief checks and strong hiring and pay gains. JPMorgan executives said Thursday that their customers are still breaking out their credit and debit cards at a healthy pace.

Kathy Bostjancic, chief U.S. economist at Oxford Economics, said that excluding inflation, retail sales still rose about 0.3% in June, up from a contractio­n of 0.4% in May. She expects the economy to grow at a slim 0.5% annual rate in the April-June quarter, after shrinking in the first three months of the year.

The report showed consumers’ ongoing appetite for non-essentials like gadgets and furniture. In fact, sales at furniture stores rose 1.4%, while consumer electronic­s stores rose 0.4%. Online sales showed resurgence, posting a 2.2% increase. Business at restaurant­s was up 1%. But department stores took a hit, posting a 2.6% decline.

The solid figures bode well for the backto-school shopping season, the second largest sales period behind the winter holidays. Mastercard SpendingPu­lse, which tracks spending across all payment forms including cash, forecasts that back-to-school spending will be up 7.5% from July 14 through Sept. 5 compared with the yearago period when sales rose 11%.

But spending is volatile. The latest round of retail earnings reports published in May showed some slowing of spending, particular­ly with low-income shoppers.

Neverthele­ss, the overall solid spending came even as shoppers were confronted with high prices in all areas. U.S. inflation surged to a new four-decade high in June because of rising prices for gas, food and rent, squeezing household budgets and pressuring the Fed to raise rates aggressive­ly — trends that raise the risk of a recession.

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