Shoppers Feeling Good, Went on Vacation in July, Sales Soft
- Retail Sales for July disappointed, unchanged from June, providing a soft start to Q3 consumer spending.
- Ex-auto Retail Sales gained just 0.1 percent, pushed by clothing, personal care and food/beverages.
- The National Federation of Independent Business’s Small Business Optimism Index climbed in July to 95.7.
- The Job Openings and Labor Turnover Survey for June showed another increase in the rate of openings.
Retail sales numbers were disappointing for July as total sales were unchanged from June, despite solid job creation over the past six months and generally improving consumer confidence trends. Headline retail sales registered a 0.0 percent change for the month, making for a slight real decline after adjusting for inflation. Not surprisingly, motor vehicles and parts sales were down 0.2 percent for the month, consistent with the drop in unit auto sales from a robust 16.9 million unit rate in June, to 16.5 million in July. Retail sales ex-autos showed a slight increase, gaining 0.1 percent, which likely did not keep up with the consumer price index for the month. The weak start to Q3 real consumer spending reinforces our expectation that the Q2 rebound to 4.0 percent real GDP growth is not sustainable. Consumers are feeling more confident and secure in their jobs, but they are not tripping over themselves to rack up more credit card debt. That is increasing, but moderately. Revolving consumer credit was up 2.5 percent in June over the previous 12 months.
The National Federation of Independent Business’s Small Business Optimism Index is trending up, increasing to 95.7 in July. Both the actual compensation and the planned compensation components of the survey are trending up, indicating some current and future wage pressure. We expect to see the U.S. unemployment rate continue to trend down this fall. Already, some regional and occupational indicators are showing tightening labor markets, setting the stage for accelerating wage gains over 2015.
The Job Openings and Labor Turnover Survey (JOLTS) for June showed improved labor market conditions through mid-summer. The job openings rate is showing ongoing gains, up in June for the fourth consecutive month. The Job openings rate for June stands at 3.3 percent, on par with the cyclical highs of the previous expansion from 2007.
Market Reaction: Equity markets opened with gains. The 10-year Treasury yield is down to 2.43 percent. NYMEX crude oil is up to $97.03/barrel. Natural gas futures are down to $3.91/mmbtu.
For a PDF version of this Comerica Economic Alert click here: Retail Sales 08-13-14.