In this morning’s data, Retail Sales for July were flat for the month, one-tenth less than expected. For the month, Non-store retailers were relatively strong, up 2.7%, while Gasoline Stations, down -1.8%, and Motor Vehicle & Parts Dealers, down -1.6%, were 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 0.8% in July, higher than expected.
Overall, headline retail sales were flat for the month driven primarily by a decrease in gasoline and autos. From a control group perspective which removes these items, consumers appear to be hanging in there but are shifting some of their spending habits to deal with higher prices per results from Wal-Mart and Home Depot earlier this week. At Wal-Mart, the company’s revenues were weighted more towards groceries as consumers are paying more for essential items, leaving less available for other goods. At Home Depot, consumers appear to be shifting to home improvement projects as higher interest rates are making home purchases less affordable. How consumers adjust their spending amidst likely further policy tightening by the Federal Reserve will be a key factor in the direction of the economy in the coming months.
In all, the 10-year US treasury yield is ticks lower following the report and equity futures are also lower as we head into the market open.
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