Announced this morning, Retail Sales increased 1.0% in July, higher than expected and well above the previous month’s revised increase. Monthly sales for Motor Vehicle & Parts Dealers, up 3.6%, were strong while monthly sales at Miscellaneous Store Retailers, down -2.5%, were relatively weak. The Control Group, which is a closer measure of the inputs for GDP that excludes sales for food, autos, building materials, and gas stations, increased 0.3% in July, also higher than expected and six tenths lower than the revised level from the previous month.
In addition, Initial Jobless Claims increased 227,000 for the week ending August 10th, less than expected and -7,000 less than the revised figure from the previous week.
Overall, headline retail sales increased in July more than expected, rebounding from the previous month. Consumers appear to be hanging in there, despite comments in recent earnings reports that spending is shifting given the impact of inflation. Wal-Mart noted in today’s report that the value-convenience proposition continues to resonate with customers, and earlier this week Home Depot indicated there is less demand for high ticket items and consumers may be deferring purchases. Meanwhile, jobless claims were less than expected, denoting slightly less stress in the labor market, but claims are still above levels seen earlier in the year. Given these data points, the balance between the consumer and the labor market will continue to be a key factor for the Federal Reserve’s policy and the economy in the coming months.
In all, the 10-year US treasury yield moves higher following the report and equity futures are also higher as we head into the market open.
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