Retail sales rose sharply in July, and although one month hardly makes a trend, this was a critical piece of good economic news — especially because it came with no asterisks.
After three consecutive months of declines, retail sales jumped last month to notch their biggest gain since February. Both the headline numbers and the underlying details exceeded Wall Street forecasts.
Good news through and through is a very nice change of pace, since even the most positive of recent economic data have come with plenty of downsides. From productivity figures to jobless claims to the trade deficit, the devil in the details has been pointing to weak demand and ever-more sluggish growth.
But the retail sales figures were strong across the board. Sales at U.S. retailers increased 0.8% month-to-month against expectations of just a 0.2% rise. The rebound is even more impressive considering the June figure was revised down to a 0.7% drop from an initial reading of -0.5%. And compared with July 2011, retail sales increased 4.1%.
Consumer spending accounts for about 70% of all economic activity, with retail sales contributing about half of that. Three straight months of declines were evidence of a recovery getting dangerously close to stall speed. Indeed, the drop in retail sales was taking a toll on gross domestic product, which expanded at a pitiful 1.5% annualized rate in the most recent quarter, down from 2% in the first quarter.
Furthermore, the surprising strength in retail sales was broad-based and holds up no matter how the data are sliced and diced.
Excluding auto sales, retail sales gained 0.8%, beating economists’ average forecast for a 0.3% gain. Gas station sales rose 0.5% on higher prices at the pump, but even after excluding those receipts, retail sales gained — you guessed it — 0.8%.
Strip out autos and gas, and retail sales advanced an even better 0.9% in July vs. June.
And, in another bullish data point for the housing market, building materials and hardware store sales added 1%, reversing a 2.3% drop in the previous month.
That all added up to good news for the so-called “core” figure, which excludes auto, gas and building materials. It gained 0.9%.
Any way you parse the data, better news flowed from all fronts. Motor vehicle sales bounced back from a 0.5% drop in June to post a 0.8% rise in July. Electronic and appliance stores enjoyed a 0.9% rise, while furniture retailers jumped 1.1%.
Sales at malls, department stores, specialty apparel retailers, sporting goods, beauty products, restaurants, online — you name it — all saw healthy gains last month.
“Bottom line, in the context of the fear of the global economic slowdown, it’s good to see retail sales bounce back from three months in a row of declines,” wrote Peter Boockvar, equity strategist at Miller Tabak.
Amen to that. It may be only one month of sales data, but we’ll take it. With the outlook for corporate earnings this quarter not looking so hot, the economy needs all the help it can get.