July Retail Sales Outpace Expectations

The positive July retail sales report comes at a good time–during the important back to school sales season.

Washington—For the first time in four months, U.S. retail sales rose in July ahead of economists’ expectations and a welcome sign to retailers.

According to the monthly report by the U.S. Department of Commerce, total July sales were up 0.8% to $403.9 billion, the biggest increase since February. Economists’ estimates expected only 0.2% growth. In its revised sales for previous months, the Commerce Department reported a 0.7% decline in June and 0.1% decline in May.

“The retail sales data suggest that the U.S. economy fared surprisingly well in the face of ongoing uncertainty and renewed contraction in the Eurozone, and argues against the need for additional stimulus from the Fed,” said Chris Williamson, chief economist for Markit, who cautioned that retail number tend to be volatile.

“Halfway through the back-to-school season retailers are seeing positive signs that consumers are spending,” said Matthew Shay, president/ceo at National Retail Federation (NRF). “However, sustained retail growth hinges on Congress’ and the administration’s ability to make smart decisions about the economy and Americans’ confidence in our long-term recovery.”

Excluding auto, gasoline and restaurants sales, so-called core retail sales were up 0.8% from June and up 4.1% adjusted year over year. Better still, all major categories of retail showed increases. Clothing and accessories stores were up 0.8% from June and up 5% from July 2011.

Retail to Grow Modestly in Fall/Winter?

General merchandise stores’ sales increased 0.7% with department store showing a 0.6% increase. Nonstore retailers, which include online sales, were up 1.5%.

“Despite high unemployment, and political and fiscal uncertainty, consumers are spending again, albeit cautiously,” NRF Chief Economist Jack Kleinhenz said. “Retail sales continue to remain resilient in the face of bleak international news, with retailers on track with sustained sales growth year-over-year and year to date. Retail sales will continue to see modest growth in the fall and winter.”

Prior to July, retail sales had declined for three consecutive months in a row, dragging on overall economic growth and heightening calls for the Federal Reserve to do more to boost the recovery.

Following three months of disappointing sales, skittish consumers returned to stores in July,” said RILA President Sandy Kennedy. “Retailers adjustments to product assortments and pricing are paying off as budget-conscious consumers opened their wallets again last month.”

Nonetheless, Kennedy cautioned that debate between President Obama and Gov. Mitt Romney ahead of the election not to mention the looming “fiscal cliff” can affect consumers’ confidence.

“The vibrant economy we all seek cannot exist without a robust retail industry,” said Kennedy. “Consumers remain highly sensitive to economic news and policy debates that threaten their financial security. Continued high unemployment and the prospects of reaching the fiscal cliff later this year will continue to weigh on the minds of consumers as they consider their spending in the months to come.”

 

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