After a strong showing in June, American consumers slowed spending on a variety of goods in July.
What is the Retail Sales report? Produced by the Commerce Department, the report measures a sample of store receipts from businesses of all sizes. It is the timeliest indicator of broad consumer spending patterns, and usually the first picture of consumer spending for a given month.
What’s happened recently? After the big gains seen in June, Retail Sales were flat in July, frustrating economists’ predictions for a modest 0.4 percent rise. Compared to July of last year, however, Retail Sales are up 2.3 percent.
What’s the bottom line? Retail Sales were dragged down by lower sales for gasoline, sporting goods, food and beverages, and building materials. Since consumer spending makes up more than 70 percent of economic growth and is the single biggest driver of the economy, this report is one to watch for signs of potential inflation.
When economic reports, like the Retail Sales report, show positive momentum, investors could be tempted to move their money out of stable investments like Bonds and into riskier assets like Stocks to take advantage of gains. When money is shifted from Bonds to Stocks, the result can be a negative impact on home loan rates, since home loan rates are tied to Mortgage Bonds. Other factors can also influence the markets, from economic reports at home to uncertainty overseas, so it’s prudent to consider the big picture.
I’ll continue to monitor economic reports closely, but if you have any immediate questions, please call or email today.