The FINANCIAL — After reporting a sharp jump in U.S. retail sales in the previous month, the Commerce Department released a report on July 14 showing that sales unexpectedly pulled back in the month of June, according to Nasdaq.
The report said retail sales fell by 0.3 percent in June compared to economist estimates for an increase of about 0.3 percent.
The unexpected drop in sales came following a 1.0 increase in May, which was downwardly revised compared to the 1.2 percent jump originally reported.
James Knightley, an economist at ING Bank, said, “It is possible that the early Memorial Day holiday has boosted sales in May at the expense of June.”
Subsequently, Knightley suggested looking at the three-month annualized rate, which rose to 6.0 percent in June from 5.3 percent in May.
“This shows that the situation isn’t that bad and with employment and pay rising and confidence at high levels we remain optimistic on the prospects for consumer spending,” he added.
The decrease in retail sales was partly due to a sharp pullback in sales by motor vehicle and parts dealers, which tumbled by 1.1 percent in June after surging up by 1.8 percent in May.
Excluding the steep drop in auto sales, however, retail sales still edged down by 0.1 percent in June compared to a 0.8 percent increase in May. Ex-auto sales had been expected to climb by 0.5 percent.
The report also showed significant decreases in sales by clothing and accessories stores, furniture and home furnishings stores, and building materials and supplies dealers.
Meanwhile, the Commerce Department said notable increases in sales by electronic and appliance stores and gas stations helped to limit the downside.
Closely watched core retail sales, which exclude autos, gasoline, and building materials, edged down by 0.1 percent in June after climbing by 0.7 percent in the previous month.
Following the strong increase in May, Paul Ashworth, Chief U.S. Economist at Capital Economics, said he would be very wary of reading too much into the modest drop back in June.
“The bottom line is that, despite the disappointing sales figures for June, second-quarter GDP growth was probably still close to 3.0% annualized,” Ashworth said.
He added, “With the risks from Greece and China seemingly fading, a September rate hike is still a distinct possibility.”
The Commerce Department noted that total retail sales in June were up by 1.4 percent compared to the same month a year ago, reflecting a notable deceleration from the 2.3 percent annual growth seen in May.
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