Economic Report: U.S. retail sales jump 7.5% in June, but fresh coronavirus outbreak poses new hurdle

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The numbers: Sales at U.S. retailers posted a big increase in June for the second month in a row, but a surge in coronavirus cases that’s led to more restrictions on business threatens to sap the momentum of the economic recovery.

Retail sales climbed 7.5% last month following a record 18.2% increase in May, the government said Thursday. Economists polled by MarketWatch had forecast a 5.4% increase.

Sales still haven’t returned to precrisis trends, however, after a huge drop in the first two months of the pandemic. The recent upturn could also stall if the virus continues to rage and more states reimpose restrictions on retailers and other businesses that rely on customers visiting their stores.

Read:Walmart and Best Buy now require customers to wear face coverings at its stores

What happened: Sales jumped 8.2% at auto dealers, which have gotten a big boost from plunging interest rates. Car buyers with secure jobs and good incomes have been snapping up new vehicles to take advantage of low rates.

Read:Soaring demand for federal jobless benefits points to fresh fissures in the economy

Sales also increased 15.3% at gas stations largely because of a steady increase in the price of oil after it fell to an 18-year low earlier in the year. Most Americans are driving far less, however, and the cost of gas isn’t as big a drain on household finances as it usually is.

If autos and gasoline are stripped out, retail sales still rose a robust 6.7% last month.

Sales increased at most retailers, including bars, restaurants and stores that sell clothes, home furnishings and electronics.

Sales fell slightly at home centers, grocers and Internet retailers, one of the standout performers during the pandemic. Sales dipped 2.4% in June, though they are up nearly 24% from a year earlier. There’s been a surge in online shopping with so many people staying at home out of fear of catching the virus.

See: MarketWatch Economic Calendar

Big picture: The swift rebound in retail sales in May and June was largely due to the release of pentup demand and a massive infusion of government aid to workers and businesses.

Sales are unlikely to maintain the torrid pace with so many people still out of work and the latest viral outbreak forcing many states to halt the next phase of their reopening plans. That could pose another major hurdle for a U.S. economy in its effort to come back from the steepest, if shortest, recession in American history.

Market reaction: The Dow Jones Industrial Average DJIA, +0.85% and S&P 500 SPX, +0.90% were set to open lower in Thursday trades.

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