The monthly retail sales report for the United States will be released by the Commerce Department today.
The data will provide a glimpse into the strength of US consumer spending at retail outlets during July. The retail sales data comes at a crucial time amid the never-ending US-China trade war.
Economists forecast that headline retail sales rose 0.3% on the month in July. This follows a 0.7% increase in the month before. Excluding autos, monthly retail sales are forecast to rise by 0.4%, the same pace as the previous month.
In June, the year over year growth in retail sales was 3.4%.
On a monthly basis, retail sales data is recovering from the sluggish growth in the latter part of 2018 and in the first few months of 2019.
Consumer spending, which was averaging around 4.3%, was one of the main contributors to the US GDP in the second quarter of the year. Consumer spending is supported by the strong labor market in the backdrop.
US employers added 164,000 jobs during the month, with the labor force hitting a new high. There was also an increase in average wages. Wages rose 3.2% from the year before. While the annualized pace has flatlined, there was a modest pick up on a month to month basis.
Household savings also got a boost by the stable interest rates and the prospects of a rate cut. Meanwhile, consumer confidence is back to historically high levels.
Consumer Sentiment Firm in July
Consumer sentiment also plays a key role in determining the retail sales figure. Various measures of consumer confidence give a fairly stable picture. This should be supportive of a somewhat modest picture of the retail sales sector.
The Conference Board’s consumer sentiment index showed a slight increase. Consumer confidence rebounded in July, with the index registering a print of 135.7 during the month. It was up from 124.3 in June.
Expectations for the index based on consumer assessment of the businesses and labor markets rose from 164.3 to 170.9. But, other measures of consumer confidence were mixed. For example, the University of Michigan consumer confidence index posted a decline.
The index fell just below the expectations of 98.5, to register a reading of 98.4. Consumer confidence, as measured by the UoM, was slightly higher compared to June’s print of 98.2
July Auto Sales Decline for 4th Consecutive Month
Dampening the outlook somewhat has been weaker than expected auto sales in July. The seasonally adjusted annualized pace of sales was at 16.82 million. While this was a decline, it was still higher compared to the average estimates. But the data for July was the fourth consecutive month that auto sales fell below the 17-million threshold.
Higher rates and transaction prices were some of the reasons for undermining sales. This comes despite an overall steady trend in the US economy and the labor market.
Fuel prices are also one of the contributing factors. Gasoline prices rose during the month. The data suggests that we could see another month of retail sales data with fairly solid gains, especially in the core control group.
The core control group excludes food services, building material, auto, and gas. For the month, the retail sales control group is forecast to rise by 0.3%, following a 0.7% increase in the month before.
For the second quarter, the control group subset rose 7.5% on an annualized basis. This was one of the strongest quarterly performances since 2005.