Retail Sales Spike In Positive Sign, Gas Throttles Back

The consumer economy is not entirely moribund. Retail sales rose .1% in June. It was not a sharp jump, but a modest sign that the American public has not locked themselves away in their homes worrying about gasoline prices and jobs.

The Commerce Department reported sales in May were revised slightly higher to a 0.1% fall from the initial estimate of a 0.2% drop.

Sales of non-core products, which include cars, gas, and building materials, were up by the same .1% – an indication that no single item has skewed the data.

Most experts anticipated a modest June improvement because of flat car sales which came out earlier this month – in a bad economy, flat is better than down. Retail sales by major chains were also good for the same reason. These numbers do not suggest that there is major shift in consumer behavior either up or down. Experts argued this morning over whether the data was positive or neutral

The other major data released by the government was that wholesale prices fell 0.4% in June.  This follows the cost of energy, oil and natural gas, posting its biggest monthly drop in two years. Energy costs sank 2.8%, mostly because of falling gasoline prices. Food prices rose 0.6%. Given the small move in all other expenses, energy costs could be the pivot on which consumer activity will turn.

The focus will now move to July. Gas prices should influence total retail as much as any other factor. Based on recent AAA data, price per gallon has dropped nearly $.20 in the last six weeks. That will either lower retail spending for July or allow consumers to shift their activity to stores and malls. Those trends will indicate whether people are saving or spending and will point to the prevailing sentiment in the economy for the second half of the year.

Douglas A. McIntyre