July Retail Sales Beat Expectations: Is the Consumer the Pillar Against Recession?

© Reuters. July Retail Sales Beat Expectations: Is the Consumer the Pillar Against Recession?

US retail sales showcased a promising surge in July, outpacing expectations and demonstrating the resilience of consumers, according to data released by the Commerce Department. Sales witnessed an uplift of 0.7% in July, a figure that comes after upward revisions in the preceding two months. This uptrend was evident across diverse sales categories such as sporting goods, apparel stores, and dining establishments. The data underscores the resilience of American households, underpinned by a robust labor market and ascending wages, which are providing a buffer to the economy amid soaring interest rates. However, the consistent strength might nudge the Federal Reserve toward a stricter monetary policy if inflation persists.

Amplifying this sentiment, Lindsey Piegza, the chief economist at Stifel Financial (NYSE:) Corp., mentioned that the robustness of consumer behavior might pave the way for a “soft landing” for the economy. Nonetheless, this also signals that the Federal Reserve could adopt a more assertive approach, potentially elevating and retaining higher interest rates. Unadjusted sales, spanning across nine out of 13 retail categories, rose last month. One notable highlight was the sales of nonstore retailers, which encompasses e-commerce platforms. They soared by 1.9%, marking the highest this year, a spike predominantly influenced by Amazon’s (NASDAQ:) Prime Day sales, which reported record-breaking numbers.

Home Depot (NYSE:). unveiled earnings earlier that surpassed the average projections made by analysts. Although the comparable sales depicted a decline, they dwindled less than what was anticipated. Later this week, retail behemoths such as Target (TGT) and Walmart (NYSE:) are scheduled to disclose their earnings. In July, sales at restaurants and bars, representing the solitary service-sector category in the report, escalated by 1.4%. Moreover, receipts from grocery stores witnessed their most substantial hike this year, reflecting in part the inflation in prices.

The economic outlook, particularly regarding consumer spending, is imbued with uncertainty. Factors like escalating delinquencies, towering debt service expenses, dwindling pandemic-era savings, and the resumption of student loan repayments potentially cast shadows over economic prospects. Contrarily, a silver lining emerges as many US citizens observe their wages growing at a pace faster than inflation, thereby bolstering household buying capacity.

This article was originally published on Quiver Quantitative