Retail Sales good not great in July

Summary

Retail sales were stronger than anticipated in July. Not only were overall sales up 0.5% during the month, but upward revisions to June activity suggest the consumer is on slightly firmer footing headed into Q3. We are still cautious on the trajectory of spending in the second half amid a moderating jobs market and concerns over higher prices.

Firmer spending partly price related

There are a few things that take some of the shine off the headline reading, but overall the latest data are consistent with a consumer that keeps spending. A big part of the strength in July spending can be traced to auto sales, which rose 1.6% during the month. In looking through autos, sales were up a more modest 0.3%.

Higher prices are also at play given retail sales are reported nominally, or not adjusted for inflation. Overall goods prices were flat in August, but higher prices for heavily-imported items like household furnishings and recreational goods lifted core goods prices and make sales at some retailers look stronger than underlying volumes likely were last month.

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