U.S Retail Sales A Big Disappointment

U.S. retail sales were unexpectedly flat in July as Americans cut back on purchases of clothing and other goods, pointing to a moderation in consumer spending that could temper expectations of an acceleration in economic growth in the third quarter.

The Commerce Department said on Friday that the unchanged reading last month followed an upwardly revised 0.8 percent

increase in June. Retail sales in June were previously reported to have increased 0.6 percent.

Sales rose 2.3 percent from a year ago. Excluding automobiles, gasoline, building materials and food services,

retail sales were also unchanged last month after an unrevised 0.5 percent increase in June.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Economists had forecast overall retail sales rising 0.4 percent and core sales climbing 0.3 percent last month.

Robust consumer spending helped to cushion the blow on the economy from an inventory correction and prolonged drag from

lower oil prices, which restricted GDP growth to an average 1.0 percent annualized rate in the last three quarters.

Friday’s data suggested consumer spending was cooling after the second quarter’s brisk 4.2 percent rate of increase.

Despite the surprise weakness in July, consumer spending remains supported by a strong labor market, as well as rising home and stock market prices. The economy created a total of 547,000 jobs in June and July.

The Atlanta Fed is currently forecasting the economy to grow at a 3.7 percent annualized rate in the third quarter.

Online retail sales jumped 1.3 percent, while receipts at clothing stores fell 0.5 percent.

With consumers cutting back on discretionary spending, sales at sporting goods and hobby stores fell 2.2 percent. Receipts at building materials and garden equipment retailers fell 0.5 percent.

There were declines in sales at electronics and appliance outlets and service stations. Americans also cut back on spending at restaurants and bars.

Reuters

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell