Retail sales went nowhere in July, showing 0.0% growth. This was the worst reading in six months.
Economists were looking for a 0.2% gain.
Excluding autos and gas, sales climbed by just 0.1%, missing expectations for a 0.4% gain.
Among the areas of strength was clothing.
“Clothing increased 0.4% primarily on the extreme discounting at related stores as many retailers rid the shelves of summer apparel, making way for the back-to-school season — the second largest season after Christmas holiday spending,” said Bloomberg economists Richard Yamarone and Josh Wright.
“A bit disappointing but the trend is OK and August should be better,” said Pantheon Macroeconomics Ian Shepherdson. “Core sales in the three months to July compared to the previous three months rose at a decent 6.2% annualized rate, but this is now set to slow. Consumers just don’t have the cashflow to financed sustained gains above 4%. Even assuming an Aug rebound, Q3 consumption looks to be heading for only 2% or so.”
The economists at Capital Economics’ are a bit more upbeat.
“There are three reasons why today’s news doesn’t mean that the third quarter will be a write-off,” said Capital Economics’ Paul Dales. “First, some of the weakness in July is probably just payback from the strength in sales in previous months. Second, the combination of faster income growth, rising wealth and easier access to credit should support spending over the rest of the year. Third, the business surveys have improved, suggesting that spending in other parts of the economy remains strong. As such, the economy will still be much stronger in the second half of the year than in the first.”
Here’s a breakdown of retail sales growth by business:
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