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Car shortage, shift in spending on service tanks US retail sales

  • July retail sales down 1.1%
  • Core retail sales are down 1.0%. June revision
  • July manufacturing output surged 1.4%

Washington, August 17 (Reuters)-US retail sales fell more than expected in July, third as shortages pushed down car purchases, and economic resumption and stimulus spending diminished. At the beginning of the quarter, it suggested a slowdown in economic growth.

The slump in sales reported by the Commerce Department on Tuesday also reflects the rotation of spending on services from goods. Retail sales dominate the merchandise component of consumer spending, which has a small share and the rest is bulky services such as healthcare, travel and hotel accommodation.

The school year will begin in earnest in late August, and most educational districts will return to face-to-face learning. So while the rise in COVID-19 cases and this month’s slump in consumer sentiment for the first time in 10 years is a wild card, consumer spending remains strong and could sustain economic growth.

“If anything, today’s data are catching up at the beginning of the third quarter after a surge in consumption growth in the second quarter due to fiscal stimulus,” said Kevin Cummins, chief US economist at NatWest. It suggests that there isn’t. ” Market in Stamford, Connecticut.

“We expect sales to recover across the quarter. Spending will benefit from the power of recent employment growth and the boost from spending in the new semester when children begin to return to school classrooms. “

Last month retail sales fell 1.1%. The June data has been revised to show a 0.7% increase in retail sales instead of the previously reported increase of 0.6%. Retail sales are 17.2% above pre-pandemic levels.

Economists surveyed by Reuters predicted retail sales would decline by 0.3%. Sales increased by 15.8% compared to July last year.

Car dealership receipts fell 3.9% after a 2.2% decline in June. Automotive production has been hampered by a global shortage of semiconductors.

Another report from the Federal Reserve Board of Governors on Tuesday shows that car production surged 11.2% in July as automakers cut or canceled annual remodeling suspensions to avoid chip shortages. There was some promising news. It boosted manufacturing production last month. read more

Online retail sales down 3.1%, return on investment after Amazon.com (AMZN.O) Prime Day has been postponed from July to June. Clothes shop sales fell 2.6%. A rebound is expected when parents shop in the new semester. In mid-July, eligible households began receiving money under an extended child tax credit program that runs through December.

Building material store sales fell, as did sports equipment, hobbies, musical instruments, and bookstore receipts.

However, consumers increased their spending on restaurants and bars, increasing receipts by 1.7%. Restaurant and bar sales increased 38.4% compared to July 2020. Restaurants and bars are the only service category in the retail sales report.

Electronics store sales increased 0.3%.

The car was sold at a car dealership in Carlsbad, California, USA on May 2, 2016. REUTERS / Mike Blake

The National Retail Federation said the July decline “did not upset the outlook for the record year,” and said consumer finance was in good shape. Labor markets are strengthening, and rising stock prices and house prices are boosting household wealth.

Wall Street shares fell after Benchmark S & P 500 (.SPX) And Dow Jones Industrial Average (.DJI) It closed at record highs on Monday. The dollar has risen against a basket of currencies. The price of the US Treasury was high.

Reuters image
Reuters image

Delta Variant Wild Card

Retail sales, excluding the automotive, gasoline, building materials and food service industries, fell 1.0% last month, following an upwardly revised 1.4% increase in June. These so-called core retail sales correspond most closely to the personal consumption component of GDP. Previously, it was estimated to have accelerated 1.1% in June.

Spending is shifting from commodities to services such as travel and entertainment, with more than 50% of the US population vaccinated against COVID-19.

However, the increase in infections caused by delta variants of the coronavirus can slow the service spending boom.

In late July, the US Centers for Disease Control and Prevention urged fully vaccinated Americans to resume wearing masks in public indoor areas in areas where the virus is rampant.

“We’ve long thought that discretionary services would boost overall consumer spending this year as the economy returns to normal,” said Tim Quinnlan, senior economist at Wells Fargo in Charlotte, North Carolina. “But now, with the resurgence of COVID, these benefits may be even more lukewarm.”

Still, the foundation for consumer spending growth remains solid. Employers are raising wages in an attempt to fill a record 10.1 million jobs. Households are sitting on excess savings of at least $ 2.5 trillion accumulated during the pandemic.

Private consumption, which accounts for more than two-thirds of US economic activity, recorded double-digit growth in the second quarter, surpassing GDP levels above its peak in the fourth quarter of 2019.

The economy grew at an annual rate of 6.5% in the second quarter. The expected slowdown in consumer spending could have been offset by strong growth elsewhere. With the latest data, including reports from the Treasury, the Federal Government of Atlanta has raised its third-quarter GDP growth estimate from 6.0% to 6.2%.

“If consumer spending slows in the coming months, overall growth could slow, but not so much,” said Ben Ayers, senior economist at Nationwide in Columbus, Ohio. Stated.

Report by Lucia Mutikani; edited by Nick Zieminski and Andrea Ricci

Our criteria: Thomson Reuters Trust Principles.

Car shortage, shift in spending on service tanks US retail sales

Source link Car shortage, shift in spending on service tanks US retail sales

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