MACRO: US retail sales rebound in June

• US retail sales above estimates
• University of Michigan consumer sentiment rebounds from record low

US retail sales rose 1% Mom in June, topping analyst estimates of 0.8% gain, and recovering from a downwardly revised 0.1% drop in May, a sign of resilient demand but also reflecting a general increase in prices for goods and services. Figures showed consumer spending remains robust but also reflect a general increase in prices for goods and services. Sales at gasoline stations recorded the biggest increase (3.6%), followed by sales at nonstore retailers (2.2%); miscellaneous store retailers (1.4%); furniture stores (1.4%); food services and drinking places (1%); motor vehicle and parts dealers (0.8%); and sporting goods, hobby, musical and book stores (0.8%). On the other hand, lower sales were recorded for building materials (-0.9%), clothing (-0.4%) and in general merchandise stores (-0.2%). Excluding automobiles, gasoline, building materials and food services, the so-called core retail sales rose 0.8% in June, after a 0.3% drop in May.

Retail sales rebounded in June. Source: Bloomberg via ZeroHedge

Despite upbeat retail sales data Wall Street indices moved higher during today's session after University of Michigan consumer sentiment  rose to 51.1 in July from a record low of 50.0 in June, beating market forecasts of 49.9. Closely watched inflation expectations fell slightly. 

Inflation expectations declined for both the year-ahead (5.2% vs 5.3%) and the 5-year outlook (2.8% vs 3.1%). Source: Bloomberg via ZeroHedge

Nevertheless, today's solid retail sales reading indicates that the US economy could actually avoid a technical recession and most likely will not change the Fed's position regarding the next rate decision in July. Of course, a 75bp hike is already certain due to rising inflation, but some analysts are also taking into account potential 100bp hike. Yesterday Fed Waller said that 100 bps is unlikely unless retail sales and housing starts figures will "materially" jump above analysts consensus and in his opinion  75 bps would get the Fed to neutral and "you don't want to overdo rate hikes".