Highlights:
- Retail sales rose 0.3% in July though were off 0.1% in volume terms (excluding the impact of prices)
- The volume of sales ex motor vehicles, parts and gasoline increased 0.7%
- E-commerce sales — only some of which are captured in headline retail sales — were up 9.4% from a year earlier
Our Take:
Retail sales rose a modest 0.3% in July, although dipped 0.1% excluding the impact of prices. This marked the second monthly dip in sales volumes but did little to retrace the 2.2% surge in buying activity in May. The volume of motor vehicles and parts sales declined though the auto sector is still on track for another historically strong year. Given the boost to sales in May, even with the modest declines in June and July, sales started the third quarter running at a 2.1% annualized pace.
Today’s report combined with strong manufacturing data for July are likely to be swamped by a sharp drop in oil and gas production when the July GDP report is released on September 28. A shutdown of a major oil producer for the entire month will act as a major weight on GDP growth in July though with production starting to come back on line in August, the factor will be reversed in subsequent months. On net, while the temporary disruption will inject volatility in the GDP data, it should not be interpreted as signaling a weakening in the economy’s momentum. Our view is that growth in the second half of the year will average 2.1%, firmer than the economy’s potential growth rate and sufficiently strong to keep the bank on its gradual tightening path.
