 | Retail Sales Increased 0.8% in July, Beating the Consensus Expected Gain of 0.3% |
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| Posted Under: Data Watch • Retail Sales |
Implications: After declining for three months in a row, retail sales rebounded sharply in July and are up 4.1% from a year ago. Consumer prices are up only about 1.6% from a year ago, which means "real" (inflation-adjusted) retail sales are up about 2.5% in the past year. That's about what we should expect in a plow horse economy. Both overall retail sales and sales ex-autos were up 0.8% in July. Most remarkably, every major category of sales was up. "Core" sales, which exclude autos, building materials, and gas, were up 0.9%. The bottom line is that despite how consumers are responding to "confidence" surveys, they are still expanding their purchases at a trend moderate rate. We expect this to continue, mainly as a by-product of job gains and wage gains. In addition, households have the lowest financial obligations ratio since the early 1990s. (This ratio is the share of after-tax income needed to make recurring monthly payments, such as mortgages, rent, car loans/leases, as well as debt service on credit cards, student loans and other lending arrangements.) In other news this morning, business inventories increased 0.1% in June, the smallest increase in nine months. Putting this data together with recent figures on trade, construction, retail sales, factory orders, suggests real GDP grew at a 2.2% annual rate in Q2, which would be an upward revision from the original government report of 1.5%.
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