2024-08-15 14:06:30
The U.S. Commerce Department reported on Thursday that consumer spending performed better than expected in July as inflation pressures showed more signs of easing.
High-end retail U.S. retail sales rose 1% in June from the previous month, according to seasonally adjusted data but not adjusted for inflation. Economists surveyed by Dow Jones had expected retail sales to rise 0.3%. Retail sales in June were initially reported to be flat, then revised down to a 0.2% decline.
Excluding auto-related items, sales rose 0.4%, also better than the 0.1% forecast.
There is also good news on the labor market: Initial unemployment claims As of the week ending August 10, the cumulative number of confirmed cases was 227,000, a decrease of 7,000 from the previous week and lower than the expected 235,000.
Sales growth was driven by increases at motor vehicle and parts dealers (3.6%), electronics and appliance stores (1.6%), and food and beverage stores (0.9%). Miscellaneous retailer sales plunged 2.5%, with sales at gas stations up just 0.1% and clothing stores down 0.1%.
Stock futures rose sharply after the data was released Thursday morning, and Treasury yields also rose sharply.
“This is yet more evidence that the U.S. consumer is still capable of surprising,” wrote Richard de Chazal, a macro analyst at William Blair. “This is another solid report that is at odds with a consumer on the brink of collapse.”
Reports released this week showed inflation data easing slightly in July.
Prices paid by consumers for goods and services rose 0.2% for the month, bringing the annual inflation rate down to 2.9%, the lowest level since March 2021. Meanwhile, wholesale prices rose just 0.1% for the month and were up 2.2% year-on-year.
While inflation remains above the Fed’s 2% target, the data showed price pressures that peaked two years ago continued to ease.
Another report released on Thursday showed the opposite, with the Labor Department saying Import prices rose 0.1% Import prices were slightly higher than expected to remain flat in July. On a year-over-year basis, import prices rose 1.6%, the largest increase since December 2022.
Financial markets expect the Fed to respond with its first interest rate cut in more than four years when it next meets in September, though a strong consumer could give policymakers more reason to take a cautious approach.
Echoing the theme of stabilizing consumers, Walmart Earlier Thursday, the company reported strong earnings and sales results for the previous quarter and raised its expectations, but issued some warnings for the second half of 2024.
In addition to seeking lower interest rates, investors are increasingly expecting the Fed to shift its focus from inflation to a broader look at possible weakness in the labor market and other areas.
The Labor Department’s jobless claims data also showed that continuing claims fell slightly from the previous week to 1.864 million. A weaker-than-expected July nonfarm payrolls report raised concerns that the labor market may be weakening.
Other economic data released Thursday pointed to shaky conditions in the manufacturing sector.
New York Fed Empire Manufacturing Company The index rose slightly but remained in negative territory at -4.7, slightly better than the -6 expected. Philadelphia Fed Manufacturing The index slipped to -7, the first negative reading since January and well below the forecast of 7.9.
Both indexes measure the percentage of companies reporting expansion rather than contraction.
In other economic news Thursday, the Federal Reserve reported that industrial production fell 0.6% in July, worse than the expected -0.1%, as Hurricane Beryl caused a 0.3 percentage point drop in total output. Capacity utilization also fell, falling to 77.8%, lower than the expected 78.5%.
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