WASHINGTON- US retail sales increased more than expected in July as Americans boosted online purchases and dined out more, suggesting the economy continued to expand early in the third quarter and keeping a recession at bay.
The report from the Commerce Department on Tuesday also showed consumers splurging on hobbies, sporting goods and clothing, underscoring their resilience despite the Federal Reserve’s aggressive interest rate hikes to tame inflation.
It prompted economists at Goldman Sachs to raise their third-quarter gross domestic product tracking estimate by a whopping seven-tenths of a percentage point to a 2.2 percent annualized rate. The economy grew at a 2.4 percent pace in the April-June quarter.
Demand is being underpinned by strong wage gains from a tight labor market. Though consumer spending continues to show signs of persistent strength, economists did not expect the Fed to raise rates next month, with inflation retreating.
The government last week reported that consumer prices rose moderately in July, with underlying inflation or the so-called core inflation slowing further.
“As long as core inflation continues to fall rapidly, resilient growth won’t in itself be enough to prompt further rate hikes from the Fed,” said Andrew Hunter, deputy chief US economist at Capital Economics.
Retail sales jumped 0.7 percent last month. Data for June was revised higher to show sales rising 0.3 percent instead of the previously reported 0.2 percent . Economists polled by Reuters had forecast retail sales would climb 0.4 percent . Sales increased 3.2 percent on year-on-year basis in July.
