What Unexpected Boost in June Retail Sales Says for Recession Fears and How Tables Could Still Turn Based on Consumer Spending
If the U.S. is headed for a recession, American consumers could be better poised to handle it than they have in the past, several experts say. JPMorgan Chase CEO Jamie Dimon said during the bank’s Q2 earnings call last week that, “Consumers are in good shape. They’re spending money. They have more income. Jobs are plentiful.”
In fact, the Advance June Retail Sales Report released from the U.S. Census Bureau on July 15 showed retail sales rising by 1% — contrary to the expected 0.1% decline predicted in May. Since figures aren’t adjusted for inflation, they partially reflect higher prices.
Still, it’s a positive indication for the economy that consumers continue to spend, experts say. “People did not fold in the face of the Ukraine shock and the subsequent surge in food and energy prices,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, told Industrial Distribution. “Instead, they ran down a small part of their pandemic savings in order to keep up their discretionary spending.”
Even when you remove inflation from the equation — per Kathy Bostjancic, chief U.S. economist at Oxford Economics — retail sales were still up by roughly 0.3% in June, according to Industrial Distribution.
Dow Jones Surges Upward
In other good economic news, the Dow Jones Industrial Average, a key indicator of the stock market as a whole, jumped 2.1% after five days of losses last week. These positive signs sparked members of the Fed to suggest a 0.75% interest rate hike at the next Federal Open Market Committee Meeting, rather than a more aggressive hike.
However, even with these positive indicators, consumers are still concerned that rising inflation will outpace their paychecks and drain their savings accounts. “Consumers signaled strong concerns that inflation will continue to erode their incomes,” said Joanne Hsu of the University of Michigan. Hsu runs the university’s Index of Consumer Sentiment, which reached its lowest point since 1952 in June 2022.
She told WSJ that, “While consumer spending has remained robust so far, the broad deterioration of sentiment may lead [consumers] to cut back on spending and thereby slow down economic growth.”
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