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US retail sales growth adds pressure to Fed rate rise

·1-min read
US Federal Reserve boss Jerome Powell (REUTERS)
US Federal Reserve boss Jerome Powell (REUTERS)

US retail sales grew 1% in June, figures released by the US Commerce Department show, as pressure mounts on the Federal Reserve to deliver a bigger interest rate rise.

The growth was led by increased sales in petrol, furniture and e-commerce and follows a 0.1% drop in retail sales in May.

Car sales went up 0.8%, while restaurant revenues grew 1%. Grocery sales were up 0.6%, but this was more likely a reflection of higher prices at the supermarket than increased consumer demand.

The figures have prompted some traders to bet on a 100 basis point interest rate rise by the Fed when it meets later this month. A 75 point raise remains the consensus prediction.

It comes after US inflation data soared past analyst expectations to hit 9.1% in June according to figures released by the US department of Labor Statistics earlier this week.

Gasoline, shelter and food were among the largest contributers to the rise, which marked the highest annual gain since November 1981, and the highest monthly gain since 2005.

Susannah Streeter, senior analyst at Hagreaves Landsdown, said: “On the face of it, US retail sales look encouraging, lifting by 1% but behind the mask of the headline figure lurks more sluggish consumer sentiment. Instead of being a sign that shoppers are more confident to splash the cash and are putting more in their baskets, much of the increase in sales has come from sharply higher prices.”

“The market has though reacted to the latest retail figures quite positively, showing just how sensitive investors are to every scrap of data which might indicate that a recession might be that bit further away on the horizon. “

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