Notwithstanding the scattered protestations of those desperately seeking confirmation bias for “slowdown” narratives that didn’t pan out this year, US retail sales were robust in July, according to data released on Tuesday.
Nominal spending rose 0.7% from June, well ahead of consensus and nearly matching the highest estimate from more than five-dozen economists.
It was the fourth consecutive monthly gain, and the pace was a marked acceleration from the prior month.
June’s headline print was revised higher. Nine of 13 categories showed an increase versus seven in June and just five this time last year.
At 1%, the ex-autos print more than doubled estimates, as did the control group, which likewise posted a 1% gain. The control group beat was good news for GDP estimates. Or bad news, depending on whether you’re inclined to fret over the prospect of a resilient American consumer compelling the Fed to stick with a hawkish bias for longer than they otherwise might.
Spending at nonstore retailers rose nearly 2% in July from June. Although consumers pulled back on purchases of electronics and furniture, food services and drinking places posted a 1.4% increase, double June’s gain. That’s the only services category in the retail sales report.
Although you could make a “no landing” case with the figures, optimists were likely to view them in conjunction with slower inflation, positive real wage growth and improving consumer sentiment on the way to arguing the “soft landing” case which, as discussed here on Monday, is dominating “hard landing” in the tug of war for macro narrative supremacy.
“All in it points to the US being on track to report 3% annualized GDP growth in the third quarter, which will keep the Fed’s language hawkish even if they don’t carry through with further rate hikes, as we expect,” ING’s James Knightley remarked, before cautioning that “the squeeze on household finances from the restart of student loan repayments” as well as “reduced access to credit” and soaring rates on credit cards, all point to a spending slowdown over the next several months.
Meanwhile, import prices for July rose twice as much as expected, posting a 0.4% MoM gain, while the August vintage of the Empire Fed survey printed a bad miss (-19 versus -1 expected). The lowest estimate for the Empire headline was -7.3. Both price gauges rose, new orders fell and the employment index slipped into negative territory. On the bright side, expectations improved.
