August 15, 2023

US retail spending picked up sharply in July.

According to an article written by Bryan Mena and published by CNN, US retail spending picked up sharply in July. When US retail spending picks up sharply, there is a significant and sudden increase in the amount of money consumers spend on goods and services at retail establishments. This uptick in spending is often seen as a positive economic indicator, as it suggests that consumers have more confidence in their financial situation and are willing to spend more on discretionary items beyond necessities.

The CNN article reported “Spending at US retailers rose in July at a much faster pace than in the prior month, a combination of both strong demand among American consumers and higher prices because of elevated inflation. It was also the fourth straight month that retail sales increased.

Retail sales, which are adjusted for seasonality but not inflation, rose 0.7% in July from the prior month, the Commerce Department reported Tuesday. That was a faster pace than the previous months upwardly revised 0.3% gain and above economists’ expectations of a 0.4% rise, according to Refinitiv.

Spending rose on nondurable items, such as clothing and sporting goods. Sales at restaurants and bars rose a robust 1.4% in July from June.

Meanwhile, sales of durable goods — defined as products meant to last at least three years — slipped. Sales at furniture stores fell 1.8% in July from June and declined 1.3% at electronics and appliance stores during the same period.

Gas prices recently climbed to their highest level in nearly 10 months, which can influence the Commerce Department’s retail-sales figures. Excluding spending at gasoline stations, retail sales rose 0.8% in July from the prior month.

The figures reflect continued resilience from US consumers in the face of higher interest rates and still-high inflation. Retail giants such as Walmart, Target and TJ Maxx parent company TJX report quarterly earnings this week, which could offer some clues on the state of the US consumer.

“Inflation still plays a role – consumers on the whole are still spending more in order to get less,” wrote Nikki Baird, vice president of strategy at retail technology company Aptos, in an analyst note. “But even with rising debt and high interest rates, July did not appear to see any blanket pullback from consumers, which may not come until student loan payments resume in September.”

Inflation has slowed over the past several months, but it remains above the Fed’s 2% target. The Consumer Price Index, a closely watched inflation gauge, rose 3.2% in July from a year earlier, picking up for the first time in more than a year, but well below the four-decade high from June 2022. The Fed’s preferred inflation gauge — the Personal Consumption Expenditure price index — rose 3% for the 12 months ended in June, easing from May’s 3.8% increase.”

Interesting Fact:

The US economy has displayed remarkable resilience this summer, despite 11 interest-rate hikes since the Federal Reserve began its inflation fight in March 2022. Americans spent big to watch the smash-hit “Barbie”film, to attend concerts by Taylor Swift and Beyoncé, and on travel.

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