US retail sales exceed expectations in July.

U.S. Retail Sales Exceed Expectations, Pointing to⁤ Economic Expansion

WASHINGTON—In a positive sign for the economy, U.S. retail sales saw⁤ a ⁣greater-than-expected increase in July. ‌Americans’​ online purchases and dining out contributed to the boost, keeping‍ a recession at bay in the early third quarter.

The Commerce Department reported​ a 0.7 percent jump in retail sales last month, with June’s data also revised higher to show a 0.3 percent increase instead of⁣ the previously reported 0.2 percent.

Economists polled by Reuters had predicted a 0.4 percent ‌climb in retail sales. It’s ‌worth noting that these figures do not⁤ account for inflation and were ⁣likely influenced by Amazon’s ⁤Prime Day promotion in the‌ previous month.

The demand for goods has remained strong despite⁢ the Federal Reserve’s efforts to control inflation through interest​ rate ⁢hikes. This can be attributed to significant ⁢wage gains resulting from‌ a tight labor market.

As inflation recedes, consumers’⁢ purchasing power is increasing. Additionally, households‍ are taking on debt to finance their ​purchases.

While lower-income households have depleted their excess savings accumulated during the COVID-19 pandemic, there is still a substantial amount of money set aside to support consumer spending.

With inflation on the ⁣decline, most economists believe ⁣that the⁣ Federal ⁢Reserve‌ is unlikely to raise rates further. In fact, there is growing support for the idea that the central bank could guide the economy toward a “soft landing” instead of the recession that had been predicted ⁢since last year.

Since March 2022, the Fed‌ has raised its benchmark overnight interest rate by ‍525 basis points, bringing it ‍to the current range of 5.25 percent–5.50 percent.

Excluding automobiles, gasoline, building materials, and food services, retail sales surged 1.0 percent in July. June’s data was revised downward to show a 0.5 ​percent increase in these ‍core retail sales instead of the previously⁢ reported 0.6 percent.

Core retail sales closely align with the consumer spending component of the gross domestic product, which accounts ⁤for‍ more than two-thirds of the U.S. economy. Although consumer spending slowed in ​the second quarter compared to the robust pace of the first quarter, the increase ​was sufficient to guide the economy to‌ a 2.4 ⁢percent annualized growth.