WASHINGTON D.C.: In May, US retail sales unexpectedly rose, which could help avoid an expected near-term recession.
Other data released last week also indicated that first-time applications for state unemployment benefits stayed level after more than a year and a half high, indicating layoffs could be rising in a tight labor market.
However, despite the Federal Reserve raising interest rate by 500 basis points since March 2022, the US economy has remained steady.
Also last week, the Fed did not raise their policy rate, but indicated that borrowing costs may still need to rise by as much as half a percentage point by year end.
“The US economy is holding up relatively well through the second quarter, despite some softness,” noted Robert Kavcic, a senior economist at BMO Capital Markets in Toronto, as quoted by Reuters.
Meanwhile, the US Commerce Department said that retail sales increased 0.3 percent last month after rising 0.4 percent in April, and sales largely included goods and are not adjusted for inflation.
While a cost of living increase has caused consumers to become more selective about prices, spending has stayed steady due to wage increases from the strong labor market, and some households still have savings accumulated from during the COVID-19 pandemic.
However, depending on June’s employment and inflation reports, strong demand could lead the Fed to raise interest rates next month.
Ben Ayers, senior economist at Nationwide in Columbus, Ohio, said, “Higher interest rates haven’t tamped down consumer demand enough to meaningfully slow price growth, especially on the services side of the economy,” as reported by Reuters.
A third report from the Labor Department showed that for the week ended June 10, initial claims for state unemployment benefits stayed at a seasonally adjusted 262,0000, remaining at levels previously seen in October 2021.
Last week, unadjusted unemployment claims increased 28,763 to 249,212.
“The rise in unemployment claims in the last two weeks, if sustained, would point to a rise in layoffs and a slowing in job growth but, at this point, falls short of signaling a yellow alert on the expansion of jobs,” noted Conrad DeQuadros, senior economic advisor at Brean Capital in New York, according to Reuters.