US retail sales dip in July as tax refund boost fades
US retail sales fell 0.6% in July, missing forecasts, as tax refunds ran out and Amazon's Prime Day moved to June. Analysts expect the dip to be temporary.
Washington: American retail sales unexpectedly contracted in July, snapping a streak of gains that had been propped up by generous tax refunds. The Commerce Department reported a 0.6% decline for the month, against economists' expectations of a 0.1% rise. The June figure was left unchanged at a 0.2% increase.
The pullback reflects several one-off factors. Generous tax refunds that had helped households absorb higher gasoline prices earlier in the year have now been exhausted. Additionally, Amazon shifted its Prime Day sales event from July to June, pulling forward demand that would otherwise have shown up in last month's figures. Lower gasoline prices also reduced receipts at service stations, and automakers reported weaker unit sales.
Despite the headline drop, analysts believe the weakness will prove temporary. A strong stock market rally — the S&P 500 is up 14% this year — has boosted household wealth, providing a cushion for spending. Economists at PNC Financial noted that bank data suggests households are becoming more sensitive to gasoline prices, but they see little risk of a sharp downturn in consumption.
"We see increasing evidence of upper-income and older households cashing in on wealth gains to support spending," PNC analysts wrote. Core retail sales, which strip out automobiles, gasoline, building materials, and food services, fell 0.4% in July after a downwardly revised 0.4% gain in June. Consumer spending, a key driver of the economy, grew at a 3.2% annualized rate in the second quarter, while overall GDP expanded at a 1.5% pace.