Boost in U.S. Retail Sales Sparks Economic Optimism Despite Inflation Concerns

U.S. retail sales showed a stronger than expected increase in June, contributing to a potential delay in a Federal Reserve interest rate cut. Inflated prices due to import tariffs played a role in the sales jump. The labor market remained stable, indicating steady economic activity.

In a surprising turn, U.S. retail sales surged more than anticipated in June, offering a glimmer of hope for economic growth and possibly prompting the Federal Reserve to reconsider immediate interest rate cuts amid inflationary pressures from import tariffs.

This upward trend was supported by Labor Department data indicating a drop in first-time unemployment applications to a three-month low, reflecting stable job creation in July. The Federal Reserve faces mounting pressure from President Donald Trump to reduce borrowing costs, but is poised to maintain its current interest rate range during this month's policy meeting.

Despite the positive momentum, inflation continues to erode consumer purchasing power. Higher prices for tariff-sensitive goods contributed significantly to the retail sales climb, raising concerns over sustainability. Stable consumer spending predicts a modest GDP rebound in the second quarter as employment figures remain robust.

(With inputs from agencies.)