H&M store opens in Herald Square on July 1, 2024 in New York City.
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Consumer spending held up better than expected in July as inflation pressures showed further signs of easing, the Commerce Department said Thursday.
Advanced retail sales rose 1% on a monthly basis, according to figures adjusted for seasonally adjusted prices, not inflation. Economists polled by Dow Jones had forecast a 0.3% increase. June sales were revised down to a 0.2% decline after initially being reported as flat.
Excluding auto-related items, sales rose 0.4%, also better than expectations of 0.1%.
There was also good news on the labor market front: Initial jobless claims for the week ending August 10 totaled 227,000, down 7,000 from the previous week and below estimates of 235,000.
The increase in sales was boosted by sales at auto and parts dealers (3.6%), electronics and appliance stores (1.6%) and food and beverage outlets (0.9%). Miscellaneous retailers saw a 2.5% decline, while gas stations saw revenues rise by just 0.1% and clothing stores saw sales fall by 0.1%.
Stock futures rose sharply following the data release Thursday morning, while Treasury yields also rose.
The report comes in the same week that data showed inflation eased slightly in July.
Prices paid by consumers for goods and services rose 0.2% on a monthly basis, and the annual inflation rate fell to 2.9%, its lowest level since March 2021. Meanwhile, wholesale prices rose by just 0.1% on a monthly basis and 2.2% on an annual basis.
While inflation figures remain above the Fed’s 2% target, the data show price pressures that peaked two years ago are continuing to ease. Financial markets expect the Fed to respond with its first rate cut in more than four years when it meets in September, though a resilient consumer could give policymakers more reason to take a measured approach to rate cuts.
In addition to seeking lower interest rates, investors increasingly expect the Fed to shift its attention from a heavy focus on inflation to a broader view of potentially weak conditions in the labor market and elsewhere.
The Labor Department's jobless claims figures also showed that continuing claims, which were delayed a week, fell slightly to 1.864 million. The weaker-than-expected payrolls report in July had raised concerns that the labor market could be weakening.
Other economic data released on Thursday showed a volatile manufacturing picture.
The New York Fed’s Empire State Manufacturing Index edged up slightly but remained in negative territory at -4.7, slightly better than the consensus estimate of -6. Meanwhile, the Philadelphia Fed’s Manufacturing Index fell to -7, its first negative reading since January and well below expectations of 7.9.
Both indicators measure the proportion of companies that reported expansion versus contraction.
This is breaking news. Please check for updates.
