United States: Retail sales pick up in July
Retail sales expanded 0.5% month-on-month in July, accelerating from June’s downwardly revised 0.2% print (previously reported: +0.5% month-on-month) and significantly beating market expectations of a 0.1% rise. The figure follows robust consumer spending in the second quarter, signaling private consumption continues to be a primary driver of growth heading into the third quarter.
The report from the Department of Commerce showed results across sectors were mixed in July. Particularly apparent was the loss of momentum in motor vehicles sales, which grew 0.2% month-on-month. This was a slight improvement over June’s revised 0.1% growth print, but markedly under the 0.9% growth previously reported. The overall retail sales print was driven by higher sales growth for food and beverage stores (July : +0.6% mom, June: +0.0% mom) gasoline stations (July: +0.8% mom, June: +0.3% mom), as well as rebounds in clothing store (July:+1.3% mom, June: -1.6% mom) and general merchandise store sales (July: +0.7% mom, June: -0.7% mom). On the other hand, sales contracted for health and personal care stores; furniture stores; sporting goods, musical instrument and book stores; and miscellaneous retailers.
Excluding automobiles and gas, retail sales grew 0.6% in July, up from June’s revised 0.2% increase (previously reported: +0.3% mom) and ahead of market expectations of 0.4% growth.
In annual terms, growth in retail sales accelerated to 6.4% in July, the strongest print in over six years, up from the revised 6.1% increase in June (previously reported: +6.6% year-on-year). Annual average retail sales growth climbed to 5.2% in July from 4.8% in June.
All in all, and despite the downward revision in June’s figures, the July data points to consumer dynamics remaining robust at the onset of the third quarter. Although retail sales data is volatile, July’s print represents the sixth consecutive month of growth, indicating a solid trend. However, even if a tight labor market in H2 continues to support private consumption, other factors could eventually weigh on its momentum. Notably, a combination of rising inflation and higher interest rates will eventually dent consumers’ purchasing power, particularly as real wage growth is still negative so far. In addition, downside risks stem from the possible escalation of U.S.-China trade tensions. The prospect of the Trump administration levying tariffs on an additional USD 200 billion worth of Chinese products—among which staple consumer goods such as appliances, clothing and furniture—would have a significant impact on American consumers’ purchasing power and weigh on private consumption.