Economists have been expecting the U.S. economy to pick up steam in the second half of the year and that view got some support from the latest retail sales report — with a bit of help from Amazon.
The Commerce Department said retail sales jumped 0.6% in July, the largest gain since December 2016 and an improvement on June’s upwardly revised 0.3% rise. Economists polled by Reuters had forecast retail sales increasing 0.4% last month.
The July surge was fueled in part by a 1.2% increase in motor vehicle sales, the biggest rise in seven months, after a 0.9% advance in June. Amazon also played a role as its annual Prime Day promotion last month contributed to a 1.3% jump in sales at online retailers.
The report “shows households still had plenty of buying power as the third quarter got under way in July,” MarketWatch said, noting that “Steady hiring, the lowest unemployment rate in 16 years and gently rising incomes have all buoyed spending in 2017, keeping the economy on a modest growth path more than eight years after an expansion took hold.”
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 2.8% annualized rate in the second quarter.
“The inherent volatility in the monthly retail sales reports notwithstanding, consumers will remain the key driver of growth in the U.S. economy,” Richard Moody, chief economist of Regions Financial, told MarketWatch.
Americans increased spending last month on most goods except for clothes and gasoline. Sales rose 1.2% at home and garden centers and even 1% at department stores that have been losing ground to online rivals.
Excluding autos and gasoline, retail sales still rose a healthy 0.5% in July after an upwardly revised 0.1% gain in June.
The government had previously reported a 0.1% drop in core retail sales in June and a 0.2% decline in overall sales. The revised numbers reflected newly incorporated sales data.
“The retail report can be quite volatile and subject to large revisions,” MarketWatch explained.