Retail sales in the United States soared past analyst expectations in July, according to government data released Thursday, helped by the autos segment and bringing some relief to policymakers.
US consumption has remained resilient despite high interest rates, and experts are closely monitoring if this holds up until the central bank begins rate cuts.
A weaker than expected labour market report recently sparked market turmoil over fears that the world’s biggest economy was in worse health than anticipated — but continued spending should allay recession worries.
In July, overall retail sales came in at $709.7 billion, up 1.0 per cent from June’s figure, said the Department of Commerce.
This was significantly higher than the 0.3 per cent bump forecast by analysts at Briefing.com.
But June’s performance was revised downwards, with sales slipping 0.2 per cent in the month instead of being virtually flat as initially estimated.
“The jump in headline retail sales in July largely reflected the bounce back in auto sales as cyberattack-related disruption faded,” said economist Michael Pearce of Oxford Economics.
While underlying details were weaker, he said they still pointed to consumer spending rising by a solid two per cent annualized in the third quarter.
“Consumers continue to spend at a solid clip, even if they are more budget-conscious and seeking more bargains,” said Nationwide chief economist Kathy Bostjancic.
Bostjancic expects the positive consumer spending data tips the scales towards a “more cautious 25 basis points cut” by the Federal Reserve in September.
“The ongoing resilience of consumer spending should ease recession fears and reduce the odds markets have placed on a larger 50 basis points cut,” said Pearce.
Instead, the Fed could opt for more gradual reductions.
Excluding motor vehicle and parts, retail sales were up by a smaller 0.4 per cent from June, said the Commerce Department.
Motor vehicles and parts dealers saw sales rise 3.6 per cent from June to July, while sales at grocery stores increased 1.0 per cent .
But Bostjancic warned that “the consumer is becoming more frugal in its spending as they have drawn down their savings, increasingly tapped credit, and still face high prices especially for services.”