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Economic News

United States: Middling Retail Sales and Disappointing Industrial Production

July 18, 2023
Marc-Antoine Dumont
Senior Economist

Highlights

  • Retail sales rose 0.2% in June after a 0.5% increase in May.
  • Motor vehicle sales were up 0.4% after advancing 1.5% the month before. Gas station receipts fell 1.4%. Excluding motor vehicles and gasoline, sales posted a 0.3% gain after rising 0.5% in May.
  • The biggest increase came from miscellaneous store retailers (+2.0%). And after four months of declines, sales at furniture stores were up 1.4%. Aside from gas stations, building materials stores posted the biggest drop (-1.2%).
  • Industrial production fell 0.5% in June after an identical decline in May. Manufacturing output and energy production were down 0.3% and 2.6%, respectively.

Comments

Total retail sales growth was fairly modest in June. The US consumer remains resilient in the face of high interest rates and relatively low confidence. But adjusted for price changes, sales were flat in June after rising 0.4% in May.

Industrial production was down more than expected, though the decline was largely due to another drop in energy production amid milder weather. Not as many sectors posted positive growth in June. Those that did included electronics (+1.3%), wood products (+1.9%) and furniture (+0.6%). We’ve seen strong growth in the automotive sector recently, but that trend reversed itself in June with a 3.0% drop. There were also sharp declines in clothing (-2.1%), nonmetallic mineral products (-1.2%) and food, beverage and tobacco products (-1.3%). It remains to be seen whether the weakness in the ISM Manufacturing index will start to show up more in the manufacturing data over the coming months.

Implications

Even though retail sales growth came in weaker than expected, it was still a positive print. This suggests the economy continued to grow at a moderate pace, just as the Federal Reserve indicated. The Fed is therefore likely to announce one last 25 basis point increase in July.