United States: Robust retails sales growth in July signals strong start to Q3 consumer spending
August 15, 2019
Nominal retail sales rose 0.7% over the previous month in seasonally-adjusted terms in July, increasing from June’s revised 0.3% increase (previously reported: +0.4% month-on-month). The surge in July, which surpassed market expectations of 0.3% growth, underscores solid consumer confidence and slightly alleviated rising concerns about the longevity of the current economic expansion. Retail sales excluding automobiles, gasoline, building materials and food services—also known as “core” retail sales as they most closely reflect private consumption in the GDP readings—rose a robust 1.0% month-on-month in July, up from 0.7% in June.
The acceleration in July was due largely to soaring non-store retail sales growth, which includes e-commerce, likely due to Amazon’s Prime Day sales event in mid-July. Brick-and-mortar stores, which have suffered in the recent past from increased competition from online retailers, also posted strong gains in the month. Moreover, spending at gasoline stations and sales of electronics and appliances; clothing; and furniture recovered in July. The weakest link of the reading was falling retail sales of auto dealers—usually a very volatile category—while spending at health and personal care stores also declined in July.
In annual terms, retail sales growth ticked up to 3.4% in July from a revised 3.3% in June (previously reported: +3.4 year-on-year). Meanwhile, annual average retail sales growth softened to 3.5% from 3.8%.
While retail sales are subject to noticeable revisions, July’s result confirms consumer spending should continue to grow at a brisk pace in the third quarter and should soften the drag from weaker business investment and manufacturing.
Author: Lindsey Ice, Economist