Data released on Friday showed Retail Sales rose 1% in June, above the 0.8% of market consensus; May’s numbers were revised higher. The June retail sales report showed that consumers are still spending more but getting less, explained analysts at Wells Fargo. They warn the staying power of consumer goods spending is waning.
“The June retail sales report shows that people are paying more but getting less. The total dollar amount of retail sales grew 1.0%, which topped consensus estimates, but after applying our inflation adjustment, we estimate that real retail sales actually fell by 1.0%.”
“Our latest forecast has the FOMC raising rates by 100 bps at its policy meeting on July 27. St. Louis Fed President James Bullard and Federal Reserve Governor Christopher Waller in separate public appearances on Thursday both backed raising rates by 75 basis points this month, though Waller said, “If that data come in materially stronger than expected it would make me lean towards a larger hike at the July meeting.”
“Continued moderation in real goods consumption should help alleviate pressure on supply chains and contribute to a decline in goods inflation. Ultimately that is what the Fed is trying to achieve: slower demand to bring down inflation. But with real retail sales still more than 6% above pre-pandemic levels through June, we expect more tightening yet before demand meaningfully declines to facilitate a reprieve in goods prices.”
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