Tax Rebates Drives Stronger Retail Sales

June 12, 2008

Retail sales increased 1.0 percent last month as tax rebates and higher gasoline prices drove stronger consumer spending. With the exception of the Miscellaneous category, retail sales increased across the board. There was surprisingly no underlying weakness in the report but jobless claims did tick higher. The biggest increase in spending came from gas station receipts, but spending on building materials and non-store (online?) retailers were also very strong. As the Bush Administration has hoped, Americans are spending rather than saving their tax rebates.

The US dollar rallied on the number, but as mentioned in my retail sales preview, the fear that consumer spending could retrench once again has capped the dollar rally. The number indicates that the economy most likely skirted negative GDP growth in the second quarter which reinforces the Federal Reserve’s plans to leave interest rates unchanged at their next meeting.

Posted in Bernanke, US Dollar, retail sales