WASHINGTON- US retail sales increased less than expected in July as consumers cut back on purchases of motor vehicles, and could slow further in the months ahead amid spiraling new COVID-19 infections and a reduction in unemployment benefit checks.
Despite the moderation in retail sales reported by the Commerce Department, sales have recouped losses suffered when businesses were shuttered to slow the spread of the coronavirus. The third straight monthly gain lifted retail sales to their highest level since the government started tracking the series in 1992. It supported the view that consumer spending would rebound this quarter after a record collapse in the second quarter.
Economists attributed the increase in retail sales over the past three months to a $600 weekly unemployment benefits supplement from the government, which amounted to almost $75 billion in July. The supplement ended on July 31, leaving economists to expect a decline in retail sales in August.
“It looks like the skies are darkening once again as the second-wave shutdowns clamp down harder on economic activity and the federal government stops sending $600 weekly checks to the unemployed,” said Chris Rupkey, chief economist at MUFG in New York. “The pandemic isn’t over yet and the recession won’t be either if Congress and the president can’t come to an agreement on how to best support the nascent recovery in a hurry.”
Retail sales rose 1.2 percent last month after advancing 8.4 percent in June. Economists polled by Reuters had forecast sales would rise 1.9 percent in July. Sales increased 2.7 percent from a year ago in July.
President Donald Trump on Saturday signed a number of executive orders, including one that extended the supplement, though he reduced the weekly payout to $400.
