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LATEST US DATA

Retail sales up 0.7% on a surge in online purchases

Biggest gain in four months signal that consumer spending continues to prop up the expansion

Washington

US retail sales rose by the most in four months and exceeded projections in July on a surge in online purchases, signalling that consumer spending continues to prop up the expansion.

The value of overall sales climbed 0.7 per cent after a downwardly revised 0.3 per cent increase in the prior month, according to Commerce Department figures released on Thursday.

The reading topped all estimates in a Bloomberg survey of economists that had called for a 0.3 per cent gain.

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Sales in the "control group" subset, which some analysts view as a more reliable gauge of underlying consumer demand, rose one per cent and also topped the most optimistic projection after a 0.7 per cent rise in June. The measure excludes food services, car dealers, building materials stores and petrol stations.

The fifth-straight increase in retail sales shows that Americans, buoyed by plentiful jobs and wage gains, remain comfortable spending - a welcome sign as President Donald Trump's 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.

Ten of 13 major retail categories increased, led by a 2.8 per cent 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. Sales at department stores climbed 1.2 per cent for the best gain since October.

Among the main categories, spending declined at car dealers, while readings for both health and personal care stores and sports and hobby retailers dropped the most this year.

Federal Reserve officials cut interest rates last month for the first time in a decade while saying the labour market remains strong and citing robust consumption despite growing headwinds. Still, Mr Trump's feud with Beijing adds to global growth risks as signs of fragility spread from Germany to China and Singapore.

Stocks slumped this week, and yields on two-year US Treasuries rose above 10-year notes for the first time since the financial crisis, an inversion widely viewed as a sign of coming recession.

Motor vehicle dealers saw spending drop 0.6 per cent after increasing 0.3 per cent in the previous month. Industry data from Wards Automotive Group previously showed that July unit sales slipped to a three-month low. Excluding cars and petrol, retail sales rose 0.9 per cent, after a 0.6 per cent gain the previous month.

Filling-station receipts increased 1.8 per cent, the report showed, as petrol prices were largely unchanged in the month, according to separate data. The figures are not adjusted for price changes so sales could reflect changes in petrol costs, sales, or both.

US manufacturing output dropped in July, ending a run of two months of growth.

The Federal Reserve on Thursday said manufacturing production shrank 0.4 per cent last month, a steeper drop than the 0.1 per cent decline expected by analysts in a Reuters poll.

Overall industrial output was down 0.2 per cent in July, after analysts had anticipated a 0.1 per cent gain. BLOOMBERG, REUTERS