WASHINGTON- US retail sales fell more than expected in July as shortages depressed motor vehicle purchases and the boost to spending from the economy’s reopening and stimulus checks faded, suggesting a slowdown in economic growth early in the third quarter.
The weak sales reported by the Commerce Department on Tuesday also reflected a rotation in spending back to services from goods. Retail sales mostly capture the goods component of consumer spending, which accounts for a smaller share, with bulky services such as healthcare, travel and hotel accommodation making up the rest.
The school year gets into full swing later in August and most education districts are reverting to in-person learning. As such, consumer spending is likely to remain strong and keep the economy growing, though rising COVID-19 cases and a plunge in consumer sentiment this month to a decade low are wild cards.
“If anything, today’s data suggests that spending is not keeping pace at the start of the third quarter after the fiscal stimulus-fueled and re-opening-led surge in consumption growth in second quarter,” said Kevin Cummins, chief US economist at NatWest Markets in Stamford, Connecticut.
“We still expect sales to bounce back for the quarter as a whole. Spending will benefit from recent strength in job gains and a boost from back-to-school spending as kids begin to return to in-school classrooms.” – Reuters
