Solid Report for July Retail Sales

Wells Fargo Research Team Wells Fargo

July retail sales surpassed expectations, rising 0.7%. Gains were broad-based with ten of thirteen categories seeing an increase in sales over the month. But, despite a delay in tariffs, spending could be at risk.

Broad-based Sales Strength

Excluding volatile components, control group sales—an indicator of personal consumption expenditures (PCE)—rose 1.0%. Recall, PCE grew at a break-neck 4.3% annualized rate in Q2. While we do not expect that pace to be sustained, this report sets the consumer up for another solid gain in Q3. A notable area of strength was sales at non-store retailers, which we suspect can be in part attributed to Amazon's Prime Day.

Risks on the Horizon

July retail sales are the latest indication that the consumer is alive and well. But, consumer confidence has come off the boil recently, suggesting caution among consumers. The recent escalation in the trade war positions consumers directly in the cross fire, and, while the delay of tariffs on about $155 billion of Chinese imports means consumers may not feel it in their wallets until after the holiday season, if confidence is hit, it may curtail spending sooner.

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Wells Fargo Research Team

Wells Fargo

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