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Economic Watch: Retail Sales Recover Following Slump

U.S. consumers showed a new willingness to spend more money last month, an indication there may be increasing momentum in the economy.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
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August 13, 2015
Economic Watch: Retail Sales Recover Following Slump

 

2 min to read


U.S. consumers showed a new willingness to spend more money last month, an indication there may be increasing momentum in the economy.

The Commerce Department reported on Thursday that retail sales increased a broad-based 0.6% in July from the month before. A revision to June upped the previously announced 0.3% decline to no change from the month before.

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May’s figure was also revised upward, from a 1% improvement to a 1.2% increase from April.

Overall July sales minus autos increased 0.4%, the third straight month showing a solid improvement. This figure is what many consider a more accurate gauge of consumers’ everyday spending habits.

It’s estimated consumer spending accounts for around 70% of all U.S. economic activity, which naturally drives a lot of truck movements.

Compared to July 2014, overall retail sales last month increased 2.4%. Last year, they had jumped 4% from the previous year.

While a welcome step in the right direction, and some reassurance the consumer isn’t dead, the July monthly increase does little to suggest the U.S. consumer is back, according to Lindsey Piegza, chief economist at the investment firm Stifel Fixed Income.

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“After all, the declining trend in the annual pace of retail spending remains firmly in place, with spending slowing from a more than 4% pace in mid-2014 to 2.4% currently,” she said. “While a noticeable improvement from 1.3% reported in April, consumers have a long way to go to claw back to the more robust pace of spending reported just 12 months prior.”

Piegza pointed out that on a quarter-to-quarter basis – which is how the nation’s gross domestic product is calculated – the modest improvement in second-quarter spending was a noticeable gain from the general malaise across the first three months of the year.

“While some analysts have looked at the sizable input from spending to suggest the consumer is stronger than previously reported, and thus, the economy is stronger than previously reported, we look at the breakdown of the second quarter with more skepticism,” she said. “After all, something is needed to support consumer spending going forward, particularly business investment and development. Unfortunately, at this time, businesses continue to remain sidelined, hesitant to invest; non-residential business fixed investment fell 0.6% in the second quarter, an 11-quarter low.”

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