New York: US retail sales rose by the most in four months on a surge in online purchases, offering some comfort for the economic-growth picture amid increasing recession fears that some other data Thursday may feed into.
The value of overall retail sales climbed 0.7 per cent in July after a downwardly revised 0.3 per cent increase in the prior month, according to commerce department figures. Two regional Federal Reserve indices for August came in higher than expected, but the central bank’s measure of factory output for July declined, jobless claims were higher than estimated last week and a measure of consumer sentiment posted the biggest two-week drop since 2011.
The retail reading topped all estimates in a Bloomberg survey of economists that had called for a 0.3 per cent gain. Sales in the control group subset, which some analysts view as a more reliable gauge of underlying consumer demand, jumped 1 per cent and also exceeded the most optimistic projection after a 0.7 per cent rise in June. The measure excludes food services, car dealers, building-materials stores and gasoline stations.
The fifth-straight increase in retail sales shows Americans, buoyed by plentiful jobs and wage gains, are still spending — a welcome sign as the trade war with China weighs on the global outlook with threats of new levies on consumer goods. Personal consumption, the biggest part of the economy, was the largest driver of the expansion in the second quarter.
The numbers are extremely strong and they come on the back of several good months in a row, said Stephen Stanley, chief economist at Amherst Pierpont Securities. The main driver is the labour market, kicking off very good income gains. It’s a consumer that’s got plenty of wherewithal to spend.
Ten of 13 major retail categories increased, led by a 2.8 per cent jump for non-store sellers, which include online shopping. Retail sales in July may have been propped up by Amazon.com’s 48-hour Prime Day event, which the company said surpassed sales from the previous Black Friday and Cyber Monday combined. The promotion also likely drove shoppers to rivals Walmart and Target Corp.
Walmart on Thursday posted strong second-quarter sales and boosted its full-year outlook, and its chief financial officer said the company has used its scale to minimise price increases. US sales at department stores climbed 1.2 per cent for the best gain since October.
Among the main categories, spending dropped at automobile dealers, while readings for both health and personal care stores and sports and hobby retailers dropped the most this year.
Fed officials cut interest rates last month for the first time in a decade while saying the labour market remains strong and citing robust consumption despite growing headwinds. Still, President Donald Trump’s feud with Beijing adds to global growth risks as signs of fragility spread from Germany to China and Singapore, and investors continue to expect additional rate reductions.
Stocks have slumped this week and yields on two-year US Treasuries rose above 10-year notes for the first time since the financial crisis, an inversion that is widely viewed as a sign of coming recession.
Fed officials are more likely to look at expectations for future data rather than the current figures, said Michelle Meyer, head of US economics at Bank of America. In the past few weeks we’ve definitely seen more risk to the global outlook, she said.
Motor vehicle dealers saw spending drop 0.6 per cent after increasing 0.3 per cent in the previous month. Industry data from Wards Automotive Group previously showed July unit sales slipped to a three-month low. Excluding automobiles and gasoline, retail sales rose 0.9 per cent, after a 0.6 per cent gain the previous month.
Separate data showed labour market strength eased somewhat, though conditions remain tight overall. Jobless claims rose to a six-week high of 220,000 in the week ended August 10, and a measure of continuing claims — the number of unemployed Americans who qualify for benefits under the unemployment program — jumped to 1.726 million in the prior week for the biggest gain since February. Economists had projected initial claims would rise to 212,000.
Meanwhile, a measure of nonfarm productivity grew at a pace of 2.3 per cent in the second quarter, exceeding projections, after an upwardly revised 3.5 per cent rate in the first quarter. Unit labour costs increased at a pace of 2.4 per cent after a 5.5 per cent gain. That first-quarter figure was revised from a drop and became the biggest rise in five years.
Source: Economic Times