Retail Sales Were Unchanged in July

Implications: Retail sales were unchanged in July, ending a five month string of gains, and coming in below consensus expectations. There were no categories of sales with big gainers or any with big losers - a pretty blah report all around. Even though retail sales were flat in July, sales continue to grow at a healthy clip from a year ago, up 3.7%. Nonetheless, they have slowed recently. Over the past six months retail sales are up at a 7.6% annual rate, but over the past 3 months, sales are up 2.8% at an annual rate. While it may seem that the Plow Horse is slowing once again, we think this slowdown is temporary, especially given the fact that employment continues to improve. "Core" sales, which exclude autos, building materials and gas, increased 0.1% in July and have been positive in twelve of the last thirteen months. These sales are a key input into the GDP data and if unchanged in August and September, these sales will grow 2.0% at an annual rate in Q3 versus Q2. Once we include other spending (on services and durables), our expectation is that "real" (inflation-adjusted) consumer spending, goods and services combined, will rise at a 2.5% annual rate in Q3.

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Posted on Wednesday, August 13, 2014 @ 11:35 AM

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