Reuters
US retail sales unexpectedly stalled in July, pointing to some loss of momentum in the economy early in the third quarter.
The Commerce Department said yesterday retail sales, which had increased 0.2% in June, were in part held back by a second straight month of declines in receipts at auto dealers. July’s reading was the weakest since January.
Retail sales account for a third of consumer spending. Economists, who had forecast sales increasing 0.2% last month, expected a pick-up in the months ahead as the labour market continues to firm.
“Given the strong gains in labour market activity, along with other indications of strengthening domestic growth momentum, we expect this slowdown to be short-lived and we look for consumer spending to rebound strongly in the coming months,” said Millan Mulraine, deputy chief economist at TD Securities in New York.
The economy has experienced six consecutive months of job growth above 200,000. With layoffs and job openings back to their pre-recession levels, further gains in employment are in the cards. Data on manufacturing and services sectors have suggested the economy was growing solidly.
Still, the pause in retail sales could give the Federal Reserve ammunition to maintain its very easy monetary policy stance for a while. The US central bank has kept its benchmark overnight interest rate near zero since December 2008.
The dollar fell against the euro on the data, while prices for US Treasury debt pared losses. US stocks opened higher.
So-called core retail sales, which strip out automobiles, gasoline, building materials and food services, and correspond most closely with the consumer spending component of gross domestic product, edged up 0.1% in July. That suggested a moderation in consumer spending early in the third quarter. Core sales rose 0.5% in June.
The retail sales report, which was generally weak, suggested third-quarter growth will probably pull back after the April-June quarter’s brisk 4.0% annualised rate.
“There is downside risk to our third-quarter growth estimate of 2.9%,” said Jennifer, a senior economist at BMO Capital Markets in Toronto.
A second report on business inventories from the Commerce Department suggested the second-quarter growth estimate could be lowered. Retail inventories, excluding autos, which go into the calculation of GDP, gained 0.3% after being flat in May.
That was less than the government had assumed in the advance second-quarter GDP estimate published last month.
In July, receipts at auto dealerships fell 0.2% after declining 0.3% the prior month. Sales at non-store retailers, which include online sales, slipped 0.1%.
Sales at clothing retailers rose 0.4% and receipts at sporting goods shops gained 0.2%.
Sales at electronics and appliances stores fell 0.1%, while receipts at building materials and garden equipment suppliers rose 0.2%.