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After an earlier pullback, consumers picked up their spending in June despite anxiety over tariffs and the state of the U.S. economy.
Retail sales rose a better-than-expected 0.6% in June after declining 0.9% in May, the Commerce Department said Thursday. Sales in April fell 0.1%, pulled down by a steep drop in auto sales, after Americans ramped up their car-buying in March to get ahead of President Donald Trump’s 25% duty on imported cars and car parts.
Excluding autos and automotive parts, sales rose 0.5%, according to the Commerce Department.
There was broad-based strength across the board. Clothing and accessories sales rose 0.9%, while health and personal care sales saw a 0.5% bump. Restaurants sales rose 0.6% , while online retailers recorded a 0.4% gain. Autos and automotive parts dealers rebounded with a 1.2% increase.
There were a few weak spots like electronics and appliance retailers and department stores, both of which had sales declines.
Heather Long, the chief economist at Navy Federal Credit Union, noted that layoffs remain low and consumers are still confident enough that the economy is chugging along.
“Don’t count the American consumer out yet,” said Long in a statement. “There’s still a lot of trepidation about tariffs and likely price hikes, but consumers are willing to buy if they feel they can get a good deal. The word of the summer for the economy is resilient.”
The retail sales report arrives amid a whipsaw frenzy of on and off again tariffs have that jolted businesses and households. For businesses, that has made it harder to manage supply and inventories. Americans are focusing more on necessities, when they do shop.
The latest government report showed that inflation rose last month to its highest level since February as Trump’s sweeping tariffs push up the costs of everything from groceries and clothes to furniture and appliances.
Consumer prices rose 2.7% in June from a year earlier, the Labor Department said Tuesday, up from an annual increase of 2.4% in May. On a monthly basis, prices climbed 0.3% from May to June, after rising just 0.1% the previous month.
Trump insists that the U.S. effectively has no inflation as he has attempted to pressure Federal Reserve Chair Jerome Powell into reducing short-term interest rates.
Yet the new inflation numbers make it more likely that the central bank will leave rates where they are. Powell has said that he wants to measure the economic impact of Trump’s tariffs before reducing borrowing costs.
Americans have continued to spend, which is what the Fed had hoped to curtail a little bit with rate hikes.
One big litmus test was Amazon’s four-day Prime event along with competing retail sales from the likes of Walmart and Target that kicked off last week. Adobe Digital Insights, which tracks online sales, reported that the sales events drove $24.1 billion in online spending, a 30.3% increase compared with the same period last year.
Still, those that were buying prioritized essentials like dish soap and paper products over big-ticket purchases, according to consumer data provider Numerator, based on its analysis of Amazon Prime orders.
Deborah Weinswig, founder and CEO of Coresight Research, said she’s becoming more optimistic about the financial health of the consumer after the Amazon Prime events. She said inventories are at a healthy level, and she didn’t see big fire sales.
”People aren’t buying things that they don’t need,” she said. “I think it’s a healthier retail environment.”
Retailers are now turning their attention to the back-to-school shopping season, which is the second largest consumer rush after the winter holidays. Coresight Research estimates that total U.S. back-to-school spending will increase by 3.3% year compared with the year-ago period, to $33.3 billion. And it predicts that shoppers will do a big chunk of their shopping before August to get ahead of tariffs.
Economists will also dissect quarterly financial reports next month from major retailers like Walmart, Target and Macy’s, both for consumer behavior and to gauge how businesses are navigating a chaotic period of global trade due to fluid U.S. policies.
Levi Strauss & Co. said last week that it was cutting back on making styles that aren’t selling and making targeted price increases as it moves production away from China due to tariffs.
This story was originally featured on Fortune.com
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