U.S. Retail Sales Jump, Other Data Mixed as Growth Fears Mount
U.S. Retail Sales Top Estimates With Biggest Gain Since March
(Bloomberg) --
U.S. retail sales rose by the most in four months on a surge in online purchases, offering some comfort for the economic-growth picture amid increasing recession fears that some other data Thursday may feed into.
The value of overall retail sales climbed 0.7% in July after a downwardly revised 0.3% increase in the prior month, according to Commerce Department figures. Two regional Federal Reserve indexes for August came in higher than expected, but the central bank’s measure of factory output for July declined, jobless claims were higher than estimated last week and a measure of consumer sentiment posted the biggest two-week drop since 2011.
The retail reading topped all estimates in a Bloomberg survey of economists that had called for a 0.3% gain. Sales in the “control group” subset, which some analysts view as a more reliable gauge of underlying consumer demand, jumped 1% and also exceeded the most optimistic projection after a 0.7% rise in June. The measure excludes food services, car dealers, building-materials stores and gasoline stations.
The fifth-straight increase in retail sales shows Americans, buoyed by plentiful jobs and wage gains, are still spending -- a welcome sign as the trade war with China weighs on the global outlook with threats of new levies on consumer goods. Personal consumption, the biggest part of the economy, was the largest driver of the expansion in the second quarter.
“The numbers are extremely strong and they come on the back of several good months in a row,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC. “The main driver is the labor market, kicking off very good income gains. It’s a consumer that’s got plenty of wherewithal to spend.”
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Ten of 13 major retail categories increased, led by a 2.8% jump for non-store sellers, which include online shopping. Retail sales in July may have been propped up by Amazon.com Inc.’s 48-hour Prime Day event, which the company said surpassed sales from the previous Black Friday and Cyber Monday combined. The promotion also likely drove shoppers to rivals Walmart Inc. and Target Corp.
Walmart on Thursday posted strong second-quarter sales and boosted its full-year outlook, and its chief financial officer said the company has used its scale to minimize price increases.
U.S. sales at department stores climbed 1.2% for the best gain since October.
Among the main categories, spending dropped at automobile dealers, while readings for both health and personal care stores and sports and hobby retailers dropped the most this year.
Rate Cut
Fed officials cut interest rates last month for the first time in a decade while saying the labor market remains strong and citing robust consumption despite growing headwinds. Still, President Donald Trump’s feud with Beijing adds to global growth risks as signs of fragility spread from Germany to China and Singapore, and investors continue to expect additional rate reductions.
Stocks have slumped this week and yields on two-year U.S. Treasuries rose above 10-year notes for the first time since the financial crisis, an inversion that is widely viewed as a sign of coming recession.
Fed officials are more likely to look at expectations for future data rather than the current figures, said Michelle Meyer, head of U.S. economics at Bank of America Corp. “In the past few weeks we’ve definitely seen more risk to the global outlook,” she said.
Motor vehicle dealers saw spending drop 0.6% after increasing 0.3% in the previous month. Industry data from Wards Automotive Group previously showed July unit sales slipped to a three-month low.
Excluding automobiles and gasoline, retail sales rose 0.9%, after a 0.6% gain the previous month.
Labor Market
Separate data showed labor market strength eased somewhat, though conditions remain tight overall.
Jobless claims rose to a six-week high of 220,000 in the week ended Aug. 10, and a measure of continuing claims -- the number of unemployed Americans who qualify for benefits under the unemployment program -- jumped to 1.726 million in the prior week for the biggest gain since February. Economists had projected initial claims would rise to 212,000.
Meanwhile, a measure of nonfarm productivity grew at a 2.3% pace in the second quarter, exceeding projections, after an upwardly revised 3.5% rate in the first quarter. Unit labor costs increased at a 2.4% pace after a 5.5% gain. That first-quarter figure was revised from a drop and became the biggest rise in five years.
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- Sentiment among U.S. consumers tumbled for a second week in the largest back-to-back slide since March 2011. The Bloomberg Consumer Comfort Index decreased 1.7 points to 61.2 in the week ended Aug. 11.
- A separate report Thursday showed sentiment among U.S. homebuilders rose in August to match its 2019 high as mortgage rates tumbled, though a weaker outlook signaled concern that any gains will be temporary.
- The New York Fed’s Empire State index for August, which covers manufacturers in New York, rose to 4.8, bucking expectations for a decline. A similar gauge for the Philadelphia Fed’s region fell by less than projected, dropping to 16.8.
--With assistance from Chris Middleton, Anne Riley Moffat and Ryan Haar.
To contact the reporters on this story: Katia Dmitrieva in Washington at edmitrieva1@bloomberg.net;Reade Pickert in Washington at epickert@bloomberg.net
To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net, Vince Golle
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