US: Consumer demand started the third quarter on a strong footing - Wells Fargo

Analysts from Wells Fargo, point out that today’s Retail Sales report was strong even with weak gasoline sales and consider that consumer demand started the third quarter on a strong footing.

Key Quotes: 

“Gasoline sales declined 0.4 percent in July after a dropping 1.5 percent in June. However, none of those declines were able to put a dent on consumer demand in either month as retail and food services sales increased an upwardly revised 0.3 percent in June and a strong 0.6 percent print in July.”

“The strongest sector in June was the miscellaneous store retailers sector, growing 1.8 percent during the month after declining 1.7 percent in June. Meanwhile, non-store retailers’ sales were up 1.3 percent after a strong 1.0 percent increase in June. This sector was up 10.4 percent on a yearearlier basis.”

“The July retail sales report was strong overall and this was also reflected in the retail sales control group aggregate, which goes into the calculation of GDP. This aggregate increased 0.6 percent compared to expectations of a 0.4 percent increase. Furthermore, control group sales were upwardly revised from a 0.1 percent decline in June to an increase of 0.1 percent. This means that not only is Q2 PCE probably going to be revised higher from an already strong 2.8 percent, but that the expectations for PCE during the third quarter are also going to be marked up going forward. That is, both indicators for the consumption of goods and services from the retail sales report are looking promising for the start of the third quarter of the year. It will be interesting to see if they can keep their momentum.”