U.S. retail sales were unexpectedly flat in July, according to data from the Commerce Department.
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Following the retail sales report, the Atlanta Fed lowered its third-quarter GDP growth estimate by two-tenths of a percentage point to a 3.5 percent rate.
The Commerce Department said on Friday that the unchanged reading last month followed an upwardly revised 0.8% increase in June. Without the sales of cars-which have been an important driver of retail sales growth since the end of the recession-retail sales actually dropped 0.3 percent for the month.
All told, four of the 13 major retail sectors profiled in the July report have seen their sales drop off over the year.
Gasoline service station receipts dropped 2.7 percent, while sales weakened at sporting goods and hobby outlets, department stores, clothing merchants and restaurants.
Sales at auto and parts dealers rose a solid 1.1% in July. Spending at grocery stores fell by the most in more than five years.
It isn’t clear how much longer auto sales can support overall consumer spending.
The stalling of purchases followed a 0.8 percent gain in June that was stronger than initially estimated, Commerce Department figures showed Friday in Washington.
The retail sales figure is measured in dollars, which means that falling prices can reduce the figure even if consumer demand remains solid.
Inflation has remained stubbornly low and, while the labor market has been strong in recent months, overall economic growth was weak in the second quarter, making the current recovery the slowest since World War II.
Slumping sales at food and beverage outfits and electronics and appliance shops didn’t help the month’s cause, either, and a continued decline in clothing and department store sales doesn’t bode well for that segment of the retail industry. The average price for a gallon of gas was $2.13 nationwide on Friday, according to AAA. The economy expanded at a tepid annual pace of just 1 per cent in the first six months of 2016 despite consumer’s healthy showing in the second quarter.
Still, employers are hiring at a robust pace, adding 255,000 jobs in July and 292,000 in June, which was the most in eight months.
Friday’s report showed relatively strong sales at auto dealers and nonstore retailers alongside weakness elsewhere.
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These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Higher wages would likely fuel more spending in coming months. Service spending has been pretty robust in recent quarters, so that segment could have to carry the economic load again if the US hopes to hit respectable growth numbers in July, August and September.
