Retail sales rose slower in June than in May

Blame it on the gas.

Retail sales climbed 0.2% in June, the US Commerce Department reported last week, a dip from May’s 1% growth.

Notably, retail sales figures measure total dollars spent, so as gas prices fell last month, spending growth also slowed since shoppers were spending less on gasoline, CFO Dive noted. But US shoppers seemed to be avoiding the gas pump as best they could: Sales at gas stations dropped 5.3% in June.

“Falling fuel prices weighed on headline sales data, but a smaller bill at the pump was a source of relief for consumers and provided at least a little more cushion in household spending budgets,” Jim Baird, chief investment officer with Plante Moran financial advisors, wrote in a report, per the Associated Press.

Minus gas spending, overall spending in June climbed 0.7%, and looking away from the gas pump, consumer spending was fairly…resilient (everyone’s favorite word to describe spending). Sales at motor vehicle and parts dealers climbed 1.9%, which the report noted was buoyed by manufacturers’ incentives, while spending at clothing and accessories stores dipped slightly.

All the residents of CFOville are inevitably asking the same question right now: What does all this mean for the Fed?

And that’s where inflation data comes in. Earlier last week, the Labor Department reported that consumer prices dropped 0.4% from May to June, marking the largest monthly drop since April 2020, while inflation dipped to 3.5% on a YoY basis, from 4.2% in May.

An economic environment where inflation remains high and broader economic signals stay strong is unlikely to lead to rate cuts, which would presumably require inflation dipping closer to the Fed’s 2% target or the economy showing significant cracks. For now at least, that’s not the case.

“Despite challenges, consumers are still spending and the labor market shows no signs of cracking,” Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, said in a statement, per CNN Business. “This type of [consumer spending] data won’t move the Fed’s needle either way, but it underscores the ongoing resilience of the US economy.”