Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the report was “significantly stronger than expected” and that it “bolsters the case for a September rate hike, at the margin”.
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A crucial sales category that excludes gasoline, autos, building materials and food services rose 0.3 percent in July, as sales totals were revised upward for May and June.
The upbeat Commerce Department report Thursday should help strengthen the expectations of an interest rate hike by the Federal Reserve as soon as September. “Discretionary spending improved significantly, sending a clear signal that the back-to-school retail sales outlook is looking relatively positive”, Chris Christopher, U.S. macroeconomist and global economist at IHS Economics, wrote in a research note Thursday. GM and Ford Motor Co., whose sales exceeded forecasts, are among the beneficiaries of rising demand for large and luxury sport utility vehicles.
Additionally, core sales in the two previous months were upwardly revised to show a 0.8 percent increase in May and a 0.2 percent uptick in June.
The cost of goods imported into the United States fell 0.9 percent in July from the prior month, the biggest drop since January, another Labor Department report showed. This would reverse the 0.3 percent dip in June. The hiring has driven the unemployment rate down to 5.3 percent from 6.2 percent during that period.
Purchases at auto dealers increased 1.4 percent last month.
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“After all, the declining trend in the annual pace of retail spending remains firmly in place, with spending slowing from a more than 4% pace in mid-2014 to 2.4% now”, she said. There were also increases in sales at online stores and at restaurants and bars.
