Washington (United States) (AFP) – US consumers slowed their spending in June while energy costs fell, government data showed Thursday, cooling retail sales as further uncertainty looms from the Middle East war. Retail sales ticked up by 0.2 percent month-on-month to $768.6 billion, in line with analysts’ expectations, said the Commerce Department. This was a notable deceleration from the 1.0 percent jump in May, the report added. Excluding motor vehicles and parts, sales dropped by 0.2 percent.
The dip was driven by a 5.3 percent tumble in gasoline station sales as energy costs declined on hopes of a lasting ceasefire between the United States and Iran. But hostilities have resumed, sending oil prices higher again. While spending also fell at food and beverage stores, alongside health and personal care shops, analysts said consumers showed resilience overall. Online sales jumped, partially reflecting spending surrounding the Amazon Prime Day event and promotions by Walmart, said economist Michael Pearce of Oxford Economics.
“Given still-elevated gas prices and the fact that consumers’ buffers from higher tax refunds now appear to be mostly exhausted, we had anticipated a gradual slowdown in consumer spending around mid-year,” Pearce said. He said he still expects some moderation in spending, although growth appears resilient so far.
Economist Oliver Allen of Pantheon Macroeconomics similarly warned that “the underlying trend in spending also likely is weak.” “The subdued labor market is weighing on income growth and the personal saving rate already is relatively low,” he said in a note. “Such a slowdown would bolster the argument for the (Federal Reserve) to refrain from tightening policy,” Allen added.
US-Israel strikes targeting Iran since late February had sparked Tehran’s pushback in nearly closing off the Strait of Hormuz, a key waterway for energy transport. Energy costs surged in the aftermath. Costs at US gasoline pumps similarly climbed — adding to pressure on President Donald Trump’s administration ahead of midterm elections this year. Compared with a year ago, retail sales in June were 6.7 percent higher, the Commerce Department said.
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