Tuesday’s release of the U.S. Department of Commerce’s June Retail Sales report will provide investors and economists with an important snapshot of consumer spending trends, and, in turn, the state of the economy.
Despite the limitations of the report — exclusion of service sector spending — it is still a significant indicator of economic health.
For June, year-over-year sales are expected to dip 1.1%, while month-over-month figures are projected to increase by 0.5%.
A number falling short of expectations could suggest that the Federal Reserve’s rate hikes are starting to dampen consumer demand, while an uptick might indicate sturdy demand and support further rate hikes.
Within the retail landscape, the auto industry demands attention due to its contribution to consumer spending.
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June’s auto industry sales surged 21% to 1.38 million units, according to GlobalData’s preliminary figures, with growth fueled by a rebound from the chip shortage and the pandemic, along with easing parts shortages that have enabled automakers to increase their inventories.
June’s 15.8 million seasonally adjusted annualized rate of auto sales marked the third-highest sales pace this year. However, industry volumes are below 2015-2019 when annual U.S. sales consistently exceeded 17 million units.
Auto's aside, nonfarm payrolls in June rose 209,000 according to BLS data, missing economists' expectations of 225,000.
The lower-than-expected reading came on the heels of the ADP National Employment Report, which showed 497,000 jobs added in June.
With the unemployment rate ticking down to 3.6% and auto sales surging 21%, we may see a retail sales report above the 0.5% projections.
On retail stocks over the last month, performance has been mixed. Costco Wholesale Corporation COST moved 5.89% higher in the last four weeks, while Best Buy Co Inc BBY and Kohl’s Corporation KSS gained 3.32% and 9.65% respectively.
Though, shares of Target Corp TGT fell 1.83% over the same period.
Read next: Bank of America, Morgan Stanley, Charles Schwab Report Tuesday: Earnings Season Heats Up
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