Autos Pull Retail Sales Up in July
- May Retail Sales increased by 0.6 percent, as auto sales gained 1.2 percent.
- The Import Price Index increased by 0.1 percent in July.
Retail sales for July showed a solid 0.6 percent increase, aided in part by improved auto sales. Recall that unit auto sales increased slightly to a 16.8 million unit annual rate in July, up from 16.7 in June. Today we see that the nominal dollar value of auto sales increased by 1.2 percent in July. Excluding autos, retail sales were up 0.5 percent in July. Other categories were mostly positive, including building materials stores which saw sales improve by 1.2 percent for the month. Soft energy prices brought gasoline stations sales down by 0.4 percent in July, that should turn around in August with firmer gasoline prices. For the year ending in July, total retail sales are up 4.2 percent, implying a real gain of 2.5 percent given that the Consumer Price Index has increased by 1.7 percent during the same period. Strong job growth, improved consumer confidence, consistent house price gains and a bull run in stock prices have all helped consumer spending which is the primary support to gross domestic product. We look for ongoing strength in the consumer sector through the remainder of this year.
The U.S. Import Price Index increased by 0.1 percent in July after decreasing three out of the previous four months. A weaker dollar and firming oil prices helped to firm up the index. The price index for all imports excluding fuel still edged down by 0.1 percent in July. We expect that oil prices will gradually increase through year end and that the dollar will continue to ease, supporting import prices. Import prices are an important lever for overall inflation in the U.S. Inflation data will be closely studied this fall as the Federal Reserve adjusts monetary policy when it initiates balance sheet reduction.
Market Reaction: Equity prices are mixed. The 10-year Treasury yield is up to 2.26 percent. NYMEX crude oil is down to $47.22/barrel. Natural gas futures are down to $2.97/mmbtu.
For a PDF version of this Comerica Economic Alert click here: Retail_Sales_08152017.
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