US retail sales just half the pace forecast in June

US retail sales figures have disappointed with growth of just 0.4 per cent in June, falling from 0.5 per cent in the last month (revised down from 0.6 per cent growth).

Food and drinking establishment sales saw their biggest fall since February 2008.

Analysts had expected an increase to 0.8 per cent growth this month. Sales ex autos was entirely flat, down from 0.3 growth (economists forecast growth of 0.4 per cent).

As a result, the dollar has taken a knock, sliding against the pound on the news.

This picture doesn't marry up with very high consumer confidence, which we saw come in at 84.1 in June.

Paul Dales, senior US economist, Capital Economics:

The disappointing 0.4% m/m rise in US retail sales values in June (consensus +0.8%) increases the chances that GDP grew at an annualised rate of less than 1% in the second quarter.

Only 0.1ppt of the rise was due to the higher gasoline price increasing gasoline station sales by 0.7% m/m. Instead, the bulk of the gain was due to a 1.8% m/m rise in auto sales. But we’re less interested in this as the BEA uses the alternative unit sales figures to calculate real consumption. That’s why we are more concerned that sales excluding gasoline, autos and building materials rose by just 0.1% m/m. We had expected a 0.3% m/m rise. What’s more, May’s 0.3% m/m gain in this measure of underlying sales was revised down to a 0.2% rise.

This all means that annualised real consumption growth in the second quarter may have been between 1.0-1.5%, down from the 1.5-2.0% we previously expected. The risks to our forecast that second-quarter GDP rose by 1.0% are shifting to the downside. Looking ahead, the latest pick-up in jobs and earnings growth bode well for consumption in the third quarter. But it is disconcerting that retail sales growth lost more momentum as the second quarter progressed.