Cash-flush Americans lift US retail sales

US retail sales unexpectedly increased in June as demand for goods remained strong even as spending is shifting back to services, supporting expectations that economic growth accelerated in the second quarter.

The rebound in sales reported by the Commerce Department on Friday was despite purchases of motor vehicles declining for a second straight month due to a lack of supply caused by a global semiconductor shortage.

Sales were also flattered by higher prices resulting from supply constraints as Covid-19 vaccinations, low interest rates and massive fiscal stimulus fuel demand.

"Growing pains from reopening are on the supply side," said Chris Low, chief economist at FHN Financial in New York.

"Inflation reports earlier this week confirm firms are still struggling to keep up with this demand, but another month of high retail spending should give companies confidence that consumer demand is not slowing down anytime soon."

Retail sales rose 0.6 per cent last month. Data for May was revised down to show sales falling 1.7 per cent instead of declining 1.3 per cent as previously reported. Economists polled by Reuters had forecast retail sales dropping 0.4 per cent in June.

Sales advanced 18.0 per cent compared to June last year and are now 18.0 per cent above their pre-pandemic level.

Retail sales mostly capture the goods component of consumer spending, with services such as healthcare, education, travel and hotel accommodation making up the remaining portion. Restaurants and bars are the only services category in the retail sales report.

Demand shifted to goods like electronics and motor vehicles during the pandemic as millions of people worked from home, took online classes and avoided public transportation. Spending is now rotating back to services like travel and entertainment.