The numbers: Sales at U.S. retailers rose a solid 1% in June, but some of the increase was tied to higher prices of gasoline and food. Sales likely fell if inflation is taken into account, pointing to some softening in the economy.
Economists polled by The Wall Street Journal had forecast a 0.9% increase in retail sales last month.
Retail sales are a big part of consumer spending and offer clues on the strength of the U.S. economy.
Americans bought more new cars in June, but they also paid more to fill up at the gas pump and put dinner on the table because of higher food and energy prices. They cut back on other discretionary items such as clothes to try to even their expenses out.
After adjusting for a 1.3% increase in inflation inJune, real retail sales appear to have fallen slightly last month.
Big picture: Retailers are already witnessing the effects of high inflation as customers become more selective in what they buy.
The pullback is not limited to retail.
The broader U.S. economy appears to have slowed as the Federal Reserve moves to sharply raise interest rates. Higher rates tend to slow growth by discouraging consumers and businesses from spending or investing as much.
Market reaction: The Dow Jones Industrial Average
and S&P 500
were set to open higher in Friday trades.