Retail sales were flat in June, defying Wall Street's prediction of a decline amid signs of slowing in the US economy.
Economists had expected a 0.3% decline in spending, according to Bloomberg data. Meanwhile, retail sales in May were revised higher to an increase of 0.3%, from a prior reading of 0.1%, according to Census Bureau data.
June sales, excluding auto and gas, increased by 0.8%, above consensus estimates for a 0.2% increase. The control group in Tuesday's release, which excludes several volatile categories and factors into the gross domestic product reading for the quarter, increased 0.9% in June, above estimates for a 0.2% increase.
"Although retail sales were unchanged in June, the strong 0.9% [month-over-month] rise in control group sales should ease concerns about the plight of the consumer in the wake of the renewed slump in sentiment," Capital Economics chief North America economist Paul Ashworth wrote in a note to clients. "Admittedly, both second-quarter consumption and GDP growth still appear to have been no better than 2% annualised, but the strong gain in June does set up for a better third quarter performance."
Nonstore retailers led the gains by category, rising 1.9%. The largest decline came in gasoline stations, where sales slipped 3%. Motor vehicle and parts dealers also saw a 2% decline.
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The update on consumer spending comes amid a cooling but still growing US economy. The latest data, combined with better-than-expected readings on inflation, have prompted markets to widely expect the Fed's first interest rate cut by the end of its September meeting.
"This report shows that the consumer is holding in there well and maybe is not spending at the heady pace that we saw in the second half of last year but is certainly not falling off a cliff," Citi senior global economist Robert Sockin told Yahoo Finance. "And I think for the Fed, this will take some urgency off of easing rates, out of fears that the economy may be slowing down more sharply. So I think they're going to still signal at the July meeting a September cut is very likely, given progress on inflation."
During an interview at the Economic Club of Washington on Monday, Federal Reserve Chair Jerome Powell declined to specify when the Fed may start its easing cycle.
"I’m not going to be sending signals on any particular meeting," he said. "We are going to make these decisions meeting by meeting and the evolving data and the balance of risks."
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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