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U.S. Retail Sales Fall 0.2% In June, Missing Expectations Yet Again

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U.S. consumers bought fewer items than expected last month, according to the latest data from the U.S. Commerce Department.

U.S. retail sales dropped 0.2% in June, following an upwardly revised fall of 0.1% in May. Economists were expecting to see a 0.1% rise in the headline number.

This marked the fifth consecutive month that retail sales have missed market expectations, adding to concerns many economists have around whether or not this could weigh on the Federal Reserve’s growth outlook and plans around hiking rates further this year.

The weakness in the data was partly due to a drop in gasoline prices in June, which put pressure on the monthly gas station sales.

At the same time, core sale decreased by 0.2% last month, compared to May’s fall of 0.3%; however, economists were expecting to see a 0.2% rise.

Even the report’s control group, which strips out autos, gas, building materials, and food services, declined 0.1%.

The only positive aspect in the retail release is the upward revision to May’s data from a fall of 0.3% to a decline of just 0.1%, noted Avery Shenfeld, chief economist at CIBC Capital Markets.

“Retail sales [showed] a -0.2% headline rate, offset to some extent by a two tick upward revision to the prior month, but the "control" group also -0.1%, well below consensus and a weak indicator for June consumption. Bullish for fixed income, bearish for the US$ today,” Shenfeld wrote in a research note.

The sluggish report was released at the same time as inflation data, which also disappointed. U.S. CPI was unchanged in June, while the market consensus called for a 0.1% rise. Year-over-year inflation pace advanced 1.9%.

In reaction to both reports, gold immediately saw gains, with August gold prices last trading up 0.91% at $1,228.4.

Despite the lower-than-expected retail and inflation numbers, Michael Pearce, U.S. Economist at Capital Markets, remains optimistic in his expectations for the rest of the year.

“Overall, while June’s data were disappointing, we are still confident that the strength of the labour market, combined with healthy consumer sentiment will see spending growth of between 2.0 and 2.5% over the rest of this year,” Pearce said in a note.

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