The numbers: Sales at U.S. retailers rose solidly in June for the fourth month in a row, pointing to a strong rebound in consumer spending in the second quarter that suggests the economy is not as fragile as the Federal Reserve apparently believes.
Retail sales increased 0.4% last month, the government said Tuesday. Economists polled by MarketWatch expected a 0.1% gain.
The increase was an even larger 0.7% if gasoline sales are stripped out. Falling oil prices caused a big drop in sales at gas stations.
Retail sales offer a clear window into the health of the consumer-driven U.S. economy. Retail spending bounced back in the second quarter after a weak start early in the year.
Sales fell a sharp 1.1% at department stores, which been losing out to internet rivals for years. Electronics stores also saw a small dip.
Gas station receipts dropped 2.8% — a good thing for consumers. The average cost of a regular gallon of gas nationwide fell to $2.65 in June from $2.82 at the end of May.
The increase in sales in May was trimmed to 0.4%, but sales in April were revised up a notch to show a 0.4% increase. So, a wash.
Big picture: Americans have gone back to their spending ways. And why not: Hiring is strong, layoffs are low, incomes are rising and interest rates have declined. Consumer confidence is still pretty high even after a recent comedown.
Yet improved spending is unlikely to prevent the Fed from cutting interest rates again at the end of the month — and giving stocks another boost.
The central bank is worried about the spillover effects of the U.S. trade war with China and other potential headwinds that could pose a threat to a record-long economic expansion.
Market reaction: The Dow Jones Industrial Average
and S&P 500 index
were set to open relatively unchanged on Tuesday. Stocks have crested to fresh highs on reduced trade tensions with China and the likelihood the Fed will cut interest rates.
The 10-year Treasury yield
edged up to 2.12%.