US retail sales rebounded more than expected in June, with a 0.6% increase, suggesting modest economic improvement. This data supports the Federal Reserve’s decision to delay cutting interest rates as it gauges the inflation fallout from import tariffs.
The Labor Department reported a three-month low in first-time applications for unemployment benefits, consistent with steady job growth in July. However, the Fed is expected to keep its benchmark overnight interest rate in the 4.25%-4.50% range at its policy meeting later this month.
Retail sales were boosted by tariff-driven price increases rather than volumes. Auto dealerships saw a 1.2% increase in receipts after a decline of 3.8% in May, while online retail sales climbed 0.4%. However, receipts at electronics and appliance stores dipped 0.1%, suggesting that tariff-related price rises were suppressing demand.
Core retail sales rose 0.5%, excluding automobiles, gasoline, building materials, and food services. This data suggests that consumer spending increased moderately in the second quarter after nearly stalling in the first quarter. Economists estimate consumer spending growth below a 1.5% annualized rate in the second quarter.
The stable labor market is supporting consumer spending, with initial claims for state unemployment benefits dropping to 221,000 for the week ended July 12. However, risks are rising for both the labor market and consumer spending due to trade policy uncertainty, slowing wage growth, and higher prices from tariffs.
Source: https://www.reuters.com/business/retail-consumer/us-retail-sales-growth-steady-job-market-bolster-feds-rate-cut-delay-2025-07-17