Automobiles, promotions bolster rise in US retail sales

US retail sales increased solidly in July, supported by strong demand for motor vehicles as well as promotions by Amazon.com and Walmart, though a softening labour market and higher goods prices could curb consumer spending growth in the third quarter.

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The rise in retail sales last month together with an upward revision to June’s data, reported by the Commerce Department on Friday, eased some concerns that economic activity was stalling following soft employment growth over the past three months. “Retail sales do not give the economy a complete bill of health, but at least the consumer is not in headlong retreat and the outlook for continued moderate economic growth this quarter is positive,” said Christopher Rupkey, chief economist at FWDBONDS. “The majority of import tariff price hikes on goods are still off in the future, however, so time will tell how consumers will react when they see higher prices on goods in shops at the mall in the months to come.” Retail sales rose 0.5% last month after an upwardly revised 0.9% gain in June, the Commerce Department's Census Bureau said. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, would increase 0.5% after a previously reported 0.6% rise in June.

Part of the rise in retail sales last month could be due to tariff-driven price increases rather than volumes. Sales increased 3.9% on a year-over-year basis.