Real retail sales continue to grow despite consumer stress

• Retail Sales: +0.22% MoM (+6.7% YoY)

• Core Retail Sales: -0.15% MoM (+6.9% YoY)

Nominal retail sales results were mixed. Headline sales met expectations with an increase of 0.22%, but core sales, which exclude autos, fell month-over-month. Still, both are showing nearly 7% growth over the prior twelve months. Inflationary pressures certainly helped this annual rate, although the pace of growth has been cooling slightly since May’s multi-year high.

Nominal numbers only go so far to describe the retail sales environment, however. The stubborn presence of inflation makes these nominal numbers worth squinting at. Encouragingly, on an inflation-adjusted basis, sales maintained their growth.

The real retail sales index rose 0.64% month-over-month and 2.7% year-over-year to $231B. After today's revision, May’s numbers surpassed the previous all-time high set in April 2022. June continues that growth to new all-time highs. Despite the recent inflation, sales are growing organically, not just as a result of higher prices.

Considering the inflation over the past few months, a positive reading offers us a solid view of how resilient the US consumer still is. It doesn’t erase the fact that many households are finding it harder to meet their bills each month, but at an economic level, there hasn’t been a sharp breakdown.

A US-Iran peace deal would do much to limit inflationary pressures on struggling households. Unfortunately, I won’t be holding my breath.

Other data out later this morning:

• 10a EST: Pending home sales, forecast: -0.5% MoM

• 10a EST: NAHB Housing market index, forecast: 35