 | Retail Sales Increased 0.6% in July |
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| Posted Under: Data Watch • Retail Sales |
Implications: Robust retail sales in July as well as upward revisions for May and June make a September rate hike even more likely. Retail sales rose 0.6% in July and, including revisions to prior months, were up 1.0%. Remember how some analysts were concerned because retail sales declined in June? Well, that decline has been revised away. Meanwhile, the upward spike in May was revised to be even stronger. Although sales are up only 2.4% from a year ago, they've been accelerating lately, with sales up at a 7.3% annual rate in the past three months. About half of the increase in July was due to autos, which tend to be volatile from month to month. However, even excluding autos, sales were up 0.4% in July and a robust 1.0% including revisions to prior months. Gas station sales rose 0.4% even though prices at the pump were down for the month. This implies demand is picking up even more than in the typical July. In the twelve months through May (the latest data available) Americans drove the most miles on record. Now it looks like we hit new record highs this summer. Plugging today's report into our models suggests "real" (inflation-adjusted) consumer spending, on goods and services combined, will be up at about a 3.0% annual rate in Q3 while real GDP grows at about a 2% pace. (Inventories should be a large drag on real GDP growth in Q3.) Also, today's data, along with recent numbers on construction and inventories, signal real GDP growth for Q2 will be revised up to a 3.3% annual rate versus the government's initial estimate of 2.3%. Plow on Plow Horse, plow on! In other news this morning, new claims for unemployment insurance increased 5,000 last week to 274,000, the 23rd straight week below 300,000. Continuing claims rose 15,000 to 2.27 million. This report is consistent with a payroll gain of 200,000 in August. Meanwhile, still no sign of inflation in the trade sector. Import prices declined 0.9% in July and are down 10.4% from a year ago. The drop is mostly from petroleum, but not all of it; import prices are down 2.8% from a year ago even excluding petroleum. Export prices declined 0.2% in July and are down 6.1% from a year ago.
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