WASHINGTON, July 17 (Reuters): US retail sales rebounded more than expected in June, suggesting the economy was regaining momentum and giving the Federal Reserve cover to delay cutting interest rates while it gauges the inflation fallout from import tariffs.
The economy's improving fortunes were reinforced by other data from the Labor Department on Thursday that showed first-time applications for unemployment benefits dropped to a three-month low last week, consistent with steady job growth in July.
The US central bank is under pressure from President Donald Trump to lower borrowing costs. The Fed is, however, expected to keep its benchmark overnight interest rate in the 4.25 per cent-4.50 per cent range at its policy meeting later this month.
"For today, the message is clear," said Carl Weinberg, chief economist at High Frequency Economics. "The consumer is in good shape and does not need a boost from Fed rate cuts for now." Retail sales increased 0.6 per cent last month after an unrevised 0.9 per cent drop in May, the Commerce Department's Census Bureau said.
Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, would gain 0.1 per cent. Sales advanced 3.9 per cent on a year-over-year basis.
Part of the nearly broad rise in retail sales last month was likely due to tariff-driven price increases rather than volumes. Inflation data this week showed solid increases in June in the prices of tariff-sensitive goods like household furnishings and supplies, appliances, sporting goods and toys.
Still, the retail sales rebound after two straight monthly declines was welcome. Sales had declined as the boost from households rushing to buy motor vehicles to avoid higher prices from import duties waned. Some economists said worries of even higher prices were behind the rise in sales last month.
Auto dealerships led the rise in sales, with receipts increasing 1.2 per cent after decreasing 3.8 per cent in May.
