Consumer spending in the U.S. exceeded expectations in July, reflecting continued economic resilience as inflation pressures eased, according to a report from the Commerce Department on Thursday.
Retail sales, adjusted for seasonality but not inflation, rose by 1% in July, surpassing economists’ expectations of a 0.3% increase. This follows a revised 0.2% decline in June, which was initially reported as flat. Excluding auto-related items, sales grew by 0.4%, outperforming the anticipated 0.1% increase.
The labor market also showed signs of strength. Initial unemployment claims for the week ending August 10 fell to 227,000, down 7,000 from the previous week and below the forecasted 235,000.
July’s retail gains were driven by strong performances in several sectors. Motor vehicle and parts dealers saw a 3.6% increase in sales, while electronics and appliance stores rose by 1.6%, and food and beverage outlets grew by 0.9%. However, not all sectors fared well; miscellaneous retailers experienced a 2.5% drop, gas stations posted a modest 0.1% gain, and clothing store sales declined by 0.1%.
The positive economic data had an immediate impact on financial markets. Stock market futures surged, and Treasury yields spiked following the Thursday morning releases.
“This report reinforces the idea that the U.S. consumer continues to defy expectations,” said Richard de Chazal, macro analyst at William Blair. “It’s a strong showing that contradicts the narrative of a struggling consumer.”
The data comes as inflation showed signs of cooling in July. Consumer prices rose by just 0.2% for the month, bringing the annual inflation rate down to 2.9%, the lowest since March 2021. Wholesale prices also increased modestly, up 0.1% for the month and 2.2% year-over-year.
However, the Labor Department reported a slight uptick in import prices, which rose 0.1% in July, marking a 1.6% year-over-year increase, the largest since December 2022.
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