US consumers didn’t boost their shopping in July. If that’s a one-month blip, experts say, the economy’s growth should remain on track. If it’s not, it could be bad sign for the whole year.
Retail sales posted no growth in July – 0.0 percent over June, according to a report released Wednesday by the US Commerce Department. Analysts had expected slight growth, to the tune of about 0.2 percent. It was the measure’s worst performance in six months, since lousy winter weather hampered spending at the beginning of the year.
Excluding autos, retail sales edged up 0.1 percent. Along with autos, which fell 0.2 percent, furniture, electronics, general merchandise, and department store sales trended downward. Building materials, food and beverage, health and personal care, clothing and restaurants increased slightly.
Consumer spending in general makes up about two-thirds of overall gross domestic product, and concerns over soft retail sales come off the heels of slow consumer spending figures in recent months. Those figures, however, slowed in part due to falling health-care costs. “The data in the retail sales report encompass spending on goods only, and hence do not encompass changes in healthcare spending," Joshua Shapiro, chief US economist with the research firm MFR Inc., writes vie e-mailed analysis.
Are July’s soft retail sales figures cause for long-term concern? Some analysts worry that the numbers aren’t an auspicious start to the third quarter of the economic year. Barclays revised its GDP predictions slightly downward on the news. “On balance, this report lowered our Q2 real GDP tracking estimate one-tenth, to 4.0%, and lowered our Q3 real consumption tracking estimate to 2.3% from 2.5% and our Q3 real GDP tracking estimate to 2.4% from 2.5%,” Barclays US economist Michael Gapen writes in an e-mailed statement.
But Mr. Shapiro argues that other indicators, including labor market conditions, will weigh more heavily on overall economic growth.
“Today’s data for July were clearly disappointing,” he writes. “Still, with a wide array of labor market indicators flashing increasingly optimistic signals, and the data reported today subject to revision (sometimes considerable with this release), we are not panicking based on a single month’s result. However, if next month’s report does not show considerably better outcomes, we (and most other analysts) will need to reassess our Q3 forecasts for consumer spending in particular and overall GDP in general.”