July’s Commerce Department Report Optimistic on Retail Sales

The positive report comes as recession fears loom.

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According to last month’s report from the U.S. Commerce Department, retail sales in July surged ahead. While U.S consumers bought fewer automobiles, retail sale’s data was optimistic. The news comes at a time when Americans need to hear something positive as analysts sounded alarms about growing recession fears.

The report shows that retail sales increased by 0.7 percent in July, slightly more than June’s 0.3 percent increase. Last month’s increase was slightly ahead of economists’ predictions, which had forecast a 0.3 percent rise.

The year-to-year increase was 3.4 percent overall for the retail sector. However, the increase doesn’t take into consideration food sales, automobiles, building materials, or gasoline. When you discount those items, core retail sales had a 1 percent increase. This figure is more in line with the gross domestic product’s consumer spending index.

The strong report on retail sales accompanied robust second-quarter results by Walmart. The global leader in retail posted its five-year earnings growth, an accomplishment that no other retail chain has seen. The giant retailer raised its earnings expectations for the remainder of the year.

The U.S. administration cheered the commerce report, which comes one day after the U.S. Treasury’s yield curve inverted. It marked the first time it happened since June 2007. The warning sign triggered a sell-off in U.S. markets. However, stocks rebounded slightly after Wednesday’s losses. 

There was other bad news, however. The manufacturing sector showed signs of struggling, precipitated by a drop in production by 0.4 percent in July. Output in factories has also slowed down by more than 1.5 percent since the end of last year. This is concerning since manufacturing makes up nearly 12 percent of the economy.

Last month’s core retail gains hinted that U.S. consumers will spend robustly next quarter, but the pace is expected to slow down somewhat. Consumer spending comprises two-thirds of the U.S. economy. The country has also seen its lowest rate of unemployment in almost 50 years, even though there was an increase in unemployment applications last week. Factory employment is also seeing its lowest level since November 2016.

Despite today’s report, it is still expected that the Federal Reserve will cut interest rates again in September.

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