U.S. June Retail Sales Far Exceed Expectations — But Is the Tariff-Driven Inflation Illusionary?

TradingKey - On Thursday, July 17, the U.S. Department of Commerce released data showing that June 2025 retail sales rose 0.6% MoM, rebounding sharply from -0.9% in May — and well above the forecast of 0.1%. The core retail sales rate also improved from -0.3% to 0.5%, above the expected 0.3%.

U.S. Monthly Retail Sales, Source: TradingKey

Out of 13 categories tracked by the report, 10 showed growth, including a 0.60% rise in restaurant and bar spending — the only service category.

Inflation Masked as Growth?

However, some analysts warned that the stronger-than-expected sales figures may not reflect real consumption growth, but rather price increases driven by tariffs.

Reuters noted that part of the jump in retail sales may be due to tariff-induced inflation, rather than actual volume increases — especially in categories like furniture, appliances, toys, and sporting goods, which saw price hikes in the June CPI report.

Bloomberg echoed this view, pointing out that the retail sales data is nominal, meaning it has not been adjusted for inflation. A rise in sales could simply reflect higher prices rather than stronger demand.

Wells Fargo economists added that the household sector remains stagnant, with real consumer spending slowing.

Market Reaction: Gold Falls

With concerns over inflation resurfacing, markets adjusted their expectations for Fed rate cuts, and gold prices dropped more than $15/oz. after the release, falling to $3,315/oz.

The data suggests that tariff-driven inflation may still be a key headwind for both consumer sentiment and Fed policy flexibility.