US retail sales little changed in July as fuel, autos drop

Published Wed, Aug 17, 2022 · 08:54 PM

US retail sales were little changed in July, restrained by sharp declines in petrol prices and auto purchases that masked better results in other categories.

The value of overall retail purchases was flat last month after a revised 0.8 per cent jump in June, Commerce Department data showed on Wednesday (Aug 17). Excluding petrol and autos, retail sales rose a better-than-expected 0.7 per cent. The figures aren’t adjusted for inflation.

The median estimate in a Bloomberg survey of economists called for a 0.1 per cent rise in retail sales.

For many Americans, the significant pullback in petrol prices has boosted sentiment and likely freed up cash to spend elsewhere. Even so, widespread and persistently high inflation is eroding workers’ paychecks and forcing many to lean on on credit cards and savings to keep up. That presents an enduring headwind to the resilience of consumers in the months ahead.

Sales at petrol stations fell 1.8 per cent in July, reflecting a steady retreat in gas prices from the record highs seen in mid-June. Meantime, sales picked up elsewhere.

Nine of the 13 retail categories showed increases last month, according to the report, including building material stores, nonstore retailers and electronics.

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A pullback in consumer spending - the main engine of US growth - is a necessary element in the Federal Reserve’s inflation fight.

Policy makers are seeking to cool the economy enough to tame price increases, but not so much as to cause a recession or drive a surge in unemployment. Wednesday’s report is 1 of many data points the central bank will consider when deciding the size of another rate hike next month.

Treasury yields held gains and US stock futures remained lower after the data, which suggested consumer discretionary spending is solid enough to keep the Fed on a path of aggressive interest-rate hikes.

Earnings out this week have also shed light on the health of US consumers. After slashing its outlook a few weeks ago, Walmart said results improved more than expected in late July thanks to robust back-to-school sales, lower fuel prices and more buying by wealthier customers seeking bargains - a likely byproduct of inflation. Home Depot earnings beat estimates, but customer transactions fell for a fifth-straight quarter.

Target, however, missed even the lowest profit estimates as the company cut prices on home appliances, patio furniture and other discretionary items to right-size inventory.

Grocery store sales were up 0.2 per cent, likely reflecting rising food prices rather than a significant uptick in purchasing activity. Data out last week showed the cost of groceries has surged 13.1 per cent in the last year, the most since 1979. Sales at restaurants and bars, the only services’ component in the report, climbed 0.1 per cent, the weakest print since a decline in January. BLOOMBERG

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