Consumer spending held out better-than-expected in July as inflation pressures showed more signs of slowing, the Commerce Department reported on Thursday.
Advanced retail sales accelerated 1% month-on-month, according to seasonality-adjusted figures rather than inflation. Economists polled by Dow Jones had expected an increase of 0.3%. June sales were revised down 0.2% after they were initially reported as stable. Excluding car-related items, sales rose 0.4%, which was also better than the 0.1% forecast.
There was also good news on the labor market front: total initial jobless claims for the week ending August 10 were 227,000, down 7,000 from the previous week and below estimates of 235,000.
Gains in sales were driven by increases in sales of cars and parts dealers (3.6%), electronics and appliances stores (1.6%) and food and beverage outlets (0.9%). Diversified retailers saw a 2.5% decline while gas stations saw receipts rise by only 0.1% and clothing stores fell 0.1%.
Stock market futures rose sharply after the release of data on Thursday morning, while Treasury yields also rose.
Prices paid by consumers for goods and services rose 0.2% month-on-month, and the annual inflation rate fell to 2.9%, the lowest level since March 2021. At the same time, wholesale prices rose by only 0.1% month-on-month and 2.2% year-on-year.
While inflation figures remain above the Fed’s target of 2%, data shows continued easing of price pressures that peaked two years ago. Financial markets expect the Fed to respond with its first rate cut in more than four years when it meets in September, though a flexible consumer may give policymakers more reasons to take a thoughtful approach to cuts.
Monthly retail sales: a key indicator of economic health
“Retail Sales M/M” is a common economic indicator that measures the monthly percentage change in retail sales from the previous month. This indicator is used to track the health of the retail sector and consumer spending patterns, which are essential components of overall economic activity. Here are some key points about retail sales m/m:
Definition:
Retail sales m/m refers to “month-to-month retail sales”. It shows the percentage change in the total value of retail sales from month to month.
Important:
Retail sales are a key component of consumer spending, which makes up a large portion of overall economic activity. Changes in retail sales can provide insights into consumer confidence, purchasing power, and economic trends.
Consumer Behavior Index:
Retail sales data reflects the willingness of consumers to spend on goods and services, indicating their confidence in the economy and their financial situation.
Retail Sales Categories:
Retail sales data typically covers a wide range of categories, including electronics, clothing, food and beverage, automotive, furniture, and more. Changes in sales across these categories can reveal changing consumer preferences and economic conditions.
Market Reaction:
The release of retail sales data can impact financial markets, as it provides insights into consumer sentiment and overall economic health. Strong retail sales figures may be seen as positive for the economy and may trigger market movements.
Inflation and Economic Growth:
Retail sales trends can affect inflation levels and overall economic growth. An increase in retail sales could lead to higher inflation if demand outstrips supply, while lower sales could indicate economic weakness.
In short, retail sales on a monthly basis are a key economic indicator that provides valuable insights into consumer behavior, economic trends, the overall health of the retail sector, shaping market expectations and influencing policy decisions.
How does retail data affect stock market trends?
Retail sales data can have a significant impact on stock market trends through several mechanisms:
Consumer spending: Retail sales data directly reflects consumer spending patterns. Strong retail sales figures point to a strong economy with confident consumers, which could lead to increased revenue and profits for retail companies. This can lead to higher stock prices for these companies and boost broader market indices.
Sector Performance: Retail sales data can affect certain sectors of the stock market. Positive retail sales figures can benefit sectors such as discretionary consumer goods, retail and consumer goods, driving up stock prices in these sectors.
Economic outlook: Retail sales data is a key indicator of economic health. Strong retail sales can signal economic growth, leading to positive market sentiment and possibly pushing stock prices higher across various sectors.
Interest Rates: Strong retail sales figures can influence the Fed’s decisions on interest rates. If retail sales data indicates strong economic activity, this could prompt the Fed to consider raising interest rates to prevent prices from rising, which could affect stock prices.
Investor sentiment: Retail sales data can affect investor sentiment and confidence in the market. Positive retail sales figures may lead to a more optimistic outlook among investors, which could lead to higher stock prices.
Inflation expectations: Retail sales data is also closely watched for inflation signals. Strong retail sales can indicate increased demand, which can lead to inflation concerns. This can affect the market’s expectations of inflation and affect stock prices.
In short, retail sales data can directly influence stock market trends by influencing investor sentiment, sector performance, interest rate expectations, and overall market expectations. They provide insights into consumer behavior and economic conditions
