The retail sales in the United States grew more than expected in July amid rising purchases of motor vehicles and household apparel. This shows that the country’s economy remain strong at the beginning of the third quarter. Another data indicates that employee productivity has been at its fastest growth for over three years. The strong domestic demand favors expectations that the Federal Reserve will raise interest rates in September for the third time this year.
The Department of Commerce said that retail sales rose by 0.5% last month, but June data were revised downwards to 0.2% instead of previously announced 0.5%. The economists expected retail sales to rise by 0.1% in July. On an annual basis, they posted an increase of 6.4%.
the primary retail sales, which exclude cars, gasoline, construction materials and food, rose by 0.5% last month after a revised decline of 0.1% in June. They are closer to the component of consumer spending in gross domestic product.
The consumer spending is backed by tightening the labor market, leading to higher wages. The tax cuts and higher savings also support the consumption.
The retail sales figures in July show that the economy is starting the third quarter on a stable basis after it has achieved its best performance for nearly four years in the three months from April to June.
The US gross domestic product rose by 4.1% on an annual basis between April and June, almost double the 2.2% growth in the first quarter. Although the US economy is unlikely to repeat its strong performance in the second quarter, the expectations are for an increase of 3% between July and September.
The Fed raised its key interest rates in June and projected to raise interest rates twice more by December.
Last month, the car sales grew by 0.1% after reaching identical growth in June. The sales in clothing stores jumped by 1.3% after falling by 1.6% in June. The cash receipts at gas stations increased by 0.8%. Internet and mail sales have grown by 0.8%, possibly supported by Amazon’s Prime Day. In June, they rose by 0.7%. The Americans have spent more in restaurants and bars, which has helped boost sales by 1.3%.
However, the sales in furniture stores have fallen by 0.5% and those on building materials have remained unchanged. The cost of hobbies, musical instruments and books declined 1.7% in July.
In a separate report, the Labor Ministry reported that productivity outside the agriculture sector, measured as productivity per hour per employee, rose by 1.9% on an annual basis in the quarter between April and June. This is the strongest increase since the first quarter of 2015.