Associated Press

Aug 12, 12:24 PM EDT

Tepid retail spending in July lowers expectations for US economic growth in coming months

A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
US economy grew at sluggish 1.1 percent annual pace in April-June quarter, slightly below earlier estimate

A closely watched survey shows that business confidence in Germany, Europe's biggest economy, has dropped unexpectedly as managers' assessment of both the outlook and their current situation darkens

Officials have revised Spain's economic growth figure for the second quarter upward from 0.7 percent to 0.8 percent, welcome news for a country in its eighth month without a fully functioning government

A new government report is blaming lower-than-expected tax revenues for a spike in this year's budget deficit to $590 billion

Business activity across the 19-country eurozone grew at a steady but subdued pace in August as the region continued to show little concern about the impact of a British exit from the European Union

Spending in Britain rose by an unexpectedly robust 1.4 percent in July, the month after the U.K. voted to leave the European Union

Cuba's ruling Communist Party has released a new set of economic guidelines that emphasize the slow-moving and limited nature of the country's reforms despite a sharp national economic downturn

A new report co-sponsored by the United Nations' intellectual property organization says China has joined the world's top 25 most innovative economies for the first time

The problems bedeviling the US economy that Trump and Clinton didn't spotlight in speeches

Tepid retail spending in July lowers expectations for US economic growth in coming months

WASHINGTON (AP) -- A sluggish month of retail spending has tempered expectations for the U.S. economy's growth in the coming months.

Consumers pulled back on shopping and eating out in July after three straight solid monthly gains, the government said Friday. Those declines were offset by increases in auto sales and online and catalog sales.

Many economists credited the surge in online and catalog spending, which rose 1.3 percent, mainly to deals offered during Amazon's "Prime Day" on July 12. Amazon said its sales rose 60 percent on Prime Day compared with a year earlier.

Still, the flat reading for overall retail sales suggested that the economy might not rebound as quickly from a slump that struck early this year as economists had been expecting. And a separate report Friday that U.S. producer prices last month registered their sharpest drop since September was a reminder that inflation remains lower than the Federal Reserve wants it to be.

Combined, Friday's economic reports make it even less likely that the Fed will raise interest rates before December. Few analysts expect any changes at the Fed's next meeting in September, and some foresee no rate hike before 2017.

July's retail sales figures "won't inspire much confidence in the economic momentum at this point," Michael Dolega, senior economist at TD Bank, said in a research note. "The poor showing makes any likelihood of a rate hike this year all the more distant."

Last month's flat reading for retail spending followed increases of 0.8 percent in June, 0.2 percent in May and a robust 1.2 percent increase in April. Some economists suggested that it could mark merely a temporary dip after the solid readings through the spring.

"Given that employment has rebounded, consumer confidence is holding up, I'm not overly concerned," said Paul Ashworth, chief U.S. economist at Capital Economics.

The retail sales figure is measured in dollars, which means that falling prices can reduce the figure even if consumer demand remains solid. Excluding gasoline, retail sales rose 0.2 percent last month.

Steady hiring and some evidence of rising pay have been boosting Americans' confidence and encouraging spending, which jumped 4.2 percent in the April-June quarter, the most in 18 months.

Indeed, consumers' willingness to spend has provided one of the few sources of growth this year. The economy expanded at a tepid annual pace of just 1 percent in the first six months of 2016 despite consumer's healthy showing in the second quarter.

Still, other sources of growth are likely to emerge in the third quarter, Ashworth said, even as consumers pull back. Businesses are likely to rebuild their stockpiles, after cutting them in the second quarter. That should also add to growth, which he projects will be nearly 3 percent in the July-September quarter.

Employers are hiring at a robust pace, having added 255,000 jobs in July and 292,000 in June - the most in eight months. That's kept the unemployment rate at a low 4.9 percent, even as more Americans have started looking for work.

Strong job gains and low unemployment are starting to pressure employers to raise pay. Higher wages would likely fuel more spending in coming months. Many economists forecast that annualized economic growth will rebound to a 3 percent pace in the current July-September quarter.

Friday's report on producer prices showed that those figures, which reflect the cost of goods and services before they reach consumers, fell 0.4 percent in July.

Falling gas prices contributed to the decline. Gas prices are forecast to stay low through the summer, at an average of $2.19 a gallon, according to a report from the U.S. Energy Information Administration. Prices that low would restrain inflation and make it harder for the Fed to achieve its goal of a 2 percent annual increase in prices.

Even excluding the volatile energy and food categories, "core" producer prices dropped 0.3 percent in July, the most since February 2015.

© 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.





2006 Reading Eagle Company, All Rights Reserved
Serving the Berks County community and surrounding areas for over 130 years!
This site contains links to other Internet sites.
These links are not endorsements of any products or services in such sites,
and no information in such site has been endorsed or approved by this site.