July Retail Sales Come In Above Expectations

Written by: Alan Edwards

Consumers are spending again! The United States Commerce Department reported that consumer spending in July was greater than forecast as department stores, electronic retailers and auto dealers all reported gains in sales. The news was greeted warmly and salved the concerns that consumer spending is in a downward spiral.

July was the first gain in consumer spending in four months. Sales were up 0.8 percent – following a decrease in June of 0.7 percent which was weaker than forecast. According to the Commerce Department, economists projected a much smaller increase of only 0.3 percent.

The July sales figures show that households in America are becoming less concerned with global economic affairs as the hiring in the United States continues to improve. This optimism comes despite the United States unemployment rate being stuck at above the 8 percent level. While consumer retail spending has improved, the job market numbers have kept it in check and is in line with the Federal Reserve’s recent statement that growth of the US economy will “remain moderate over coming quarters.”

The expansion of retail sales in July came after a quarter where household spending rose at the slowest rate in a year. Consumer spending accounts for 70 percent of the economy. According to the Commerce Department for the quarter of April through June 2012 it only increased at an annual rate of 1.5 percent.

Of the 13 major retail categories all showed an increase in July. Auto sales rose by 0.8 percent, department stores saw their largest gains since last September with a 0.6 percent gain and electronic and appliance retailers sales jumped 0.9 percent.

Spending also increased at 0.8 percent in clothing stores while general merchandise stores gained 0.7 percent. Health and personal care retail sales bounced up 1.1 percent – the most in 14 months. The report also recorded a one percent increase in building-material stores.

Retail Metrics tracks same store sales and reported that they rose by 4.4 percent in July, beating estimates by nearly four times and showing a 0.3 percent increase over June 2012.

The foundation for the promising news about consumer demands is that in July payrolls increased by a net of 163,000 jobs – the largest increase in five months according to the United States Department of Labor numbers. Although the increase calmed fears that the United States labor market could be stagnating following a second-quarter slump, the rate of the unemployed rose by 0.1 percent to 8.3 percent as more workers returned to the job market.

Rising prices at the fuel pumps may dampen consumer spending elsewhere as gas rose nearly 40 cents since July. This may eat into some consumer’s ability to spend elsewhere.

The Federal Reserve remains tentative about the strength of the recovery and said on August 1st that if needed they will infuse the economy with more stimulus to foster growth and lower a jobless rate that is frozen at 8 percent or more for over three years.


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July Retail Sales Come In Above Expectations

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