Retail sales unexpectedly drop for first time in 9 months making it difficult for Fed to hike rates
US retail sales fell in July for the first time in nine months as the boost from big tax refunds faded, suggesting a marked slowdown in consumer spending at the start of the third quarter.The unexpected decline in retail sales reported by the Commerce Department on Friday was also payback after Amazon pulled forward its Prime Day event to June from July, with other retailers offering competing promotions.A retreat in gasoline prices also weighed on receipts at service stations.The report added to unexpected job losses last month and mild inflation readings in bolstering financial market expectations that the Federal Reserve would not raise interest rates in September, barring upward surprises to August price and employment data.“This points to a material slowdown in real consumer spending growth in the third quarter,” said Sal Guatieri, a senior economist at BMO Capital Markets.
“This, together with a weaker jobs report and subdued core CPI inflation, raises the odds of the FOMC staying patient again in September.”Retail sales dropped 0.6% last month after an unrevised 0.2% gain in June, the Commerce Department’s Census Bureau said.The decline was the first since last October and was the largest in 14 months.
Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, edging up 0.1%.Estimates ranged from a 0.5% drop to a 0.7% increase. Retail sales increased 5.0% year-on-year in July.Consumers are increasingly sensitive to higher prices and are becoming more selective and intentional with their purchases, economists said.The decline over the month was led by a 2.2% decrease in sales at nonstore retailers.
Receipts at motor vehicle and parts dealers tumbled 1.8%. Sales at electronics and appliance stores fell 0.5% while receipts at service stations dropped 0.9%, reflecting lower gasoline prices.But sales at clothing stores rebounded 1.9%, likely boosted by back-to-school shopping...