The second-quarter suddenly doesn’t look very strong as retail sales for June, showing broad weakness, came in way below expectations, at minus 0.3 percent. Motor vehicles were part of the reason, excluding which sales came in at only minus 0.1 percent. But excluding both autos and gasoline, core sales fell 0.2 percent.
The bounce back for gasoline prices has given gas station sales a lift the last couple of months, up 0.8 percent in June following May’s 3.7 percent surge. And there’s also two strong gains for the key general merchandise category which is up 0.7 percent and 1.4 percent the last two months. Electronic & appliance stores also show a solid gain, up 1.0 percent in June.
But that’s where the good news stops. Auto sales, though still at strong levels, fell 1.1 percent against an unusually strong May. Furniture sales fell 1.6 percent, apparel fell 1.5 percent, building materials fell 1.3 percent, and restaurants fell 0.2 percent.
The fall in restaurant sales doesn’t speak to the strong levels of consumer confidence that are being reported, readings that the Fed has been pointing to as a future indicator of strength for consumer spending. A look at year-on-year sales underscores the complete lack of consumer punch, at only plus 1.4 percent for total retail sales and only plus 2.7 percent for the core. This is a very disappointing report that will cut second-quarter GDP estimates and that will likely push back the outlook for the Fed’s rate hike from September to December, at least for now.