WASHINGTON (Reuters) – Retail sales in the United States rose less than expected in July as consumers cut back on motor vehicle purchases, and could slow further in the coming months amid the spiral of new infections in the COVID-19 and reduced checks on unemployment benefits.
Despite the moderation in retail sales reported by the Commerce Department on Friday, sales have recouped losses suffered when businesses were shut down to slow the spread of the coronavirus. The third consecutive monthly gain took retail sales to their highest level since the government began tracking the series in 1992. He supported the idea that consumer spending would rebound this quarter after a record collapse in the second quarter .
Economists attributed the increase in retail sales over the past three months to a weekly supplement of $ 600 in government unemployment benefits, which stood at nearly $ 75 billion in July. The supplement ended on July 31, leaving economists to expect retail sales to decline in August.
“It looks like the skies are darkening once more as the second wave closures further restrict economic activity and the federal government stops sending weekly $ 600 checks to the unemployed,” Chris said. Rupkey, chief economist at MUFG in New York. “The pandemic is not yet over and neither will the recession be if Congress and the President fail to agree quickly on how best to support the nascent recovery.
Retail sales rose 1.2% last month after advancing 8.4% in June. Economists polled by Reuters had forecast that sales would rise 1.9% in July. Sales increased 2.7% from a year ago in July.
President Donald Trump signed a number of executive orders on Saturday, including one extending the supplement, though he reduced the weekly payment to $ 400.
States are required to cover $ 100 of the benefits of the order, but they are under enormous financial pressure due to the pandemic. The remaining $ 300 will be funded by a limited emergency disaster relief program, which economists say could run out as early as September.
A high-level White House adviser said this week that Trump’s plan will provide an additional $ 300 per week. Republicans and Democrats are bickering over new aid to the economy even as signs mount that activity is stagnating as coronavirus infections continue to spread across the United States.
Job growth slowed in July. About 28.3 million people receive unemployment benefits.
The slowdown in retail sales in July was led by a 1.2% drop in receipts at car dealerships. This follows an acceleration of 6.1% in June. Consumers also cut spending at hobby, musical instrument and book stores, and building supply stores.
Purchases at electronics and appliance stores jumped 22.9% last month, likely reflecting strong demand as many Americans work from home.
Restaurant and bar receipts rose 5.0%, although the pace slowed from the 26.7% entered in June. Online and mail order retail sales rebounded 0.7%. Furniture store sales remained stable. Receipts at clothing stores increased 5.7%.
Excluding autos, gasoline, building materials and food services, retail sales rose 1.4% in July after rising 6.0% in June. These so-called basic retail sales correspond most closely to the consumer expenditure component of the gross domestic product report.
Consumer spending collapsed at an annualized rate of 34.6% in the second quarter. This led to the GDP plunging to a rate of 32.9% in the last quarter, the biggest drop in output since the government started keeping records in 1947.
A separate University of Michigan report on Friday showed consumer sentiment was stable in mid-August, although consumers expected “bad economic times to persist not only into the coming year.” and that many “do not expect any return to a period of uninterrupted growth over the next. five years.”
Wall Street shares were mixed in midday trading. The .DXY dollar traded lower against a basket of currencies as US Treasury bill prices rose.
“Providing additional help to struggling households will be key to preventing the growth momentum from weakening,” said Lydia Boussour, senior US economist at Oxford Economics in New York. “This is all the more critical given that recent research has shown that low-income families have played a central role in driving the initial phase of resumption of consumption.”
Although sales of motor vehicles fell last month, automakers continued to ramp up production, boosting output at factories nationwide, according to a third Federal Reserve report. Manufacturing output rose 3.4% in July after jumping 7.4% in June. Still, the third consecutive monthly gain left factory output about 8% below its February level.
“Excess capacity throughout the economy will weigh on the production of capital goods,” said Gus Faucher, chief economist at PNC Financial in Pittsburg. “The biggest downside risk is the failure of Congress and the Trump administration to agree on a fiscal stimulus package that would support consumer demand during a period of very high unemployment.
Reporting by Lucia Mutikani; Edited by Chizu Nomiyama and Paul Simao