According to a recent Commerce Department report, July retail sales jumped 0.6 percent with help from more sales in cars, construction materials, and fast-food meals.
Experts believe that consumer spending is growing due to an improving labor market. Analysts are confident that new job opportunities along with cheaper gas would further fuel consumer sentiment and spending by the end of the year.
Consumer spending is the backbone of the U.S. economy, so any increase in this indicator is beneficial for the entire economy, experts explained.
“This report looks solid after a run of disappointing numbers,”
said Ian Shepherdsona senior analyst at Pantheon Macroeconomics.
June displayed no change in consumer spending, while the rest of the year was rather grim-looking. The recent report however raised the spirits of federal economists who now expect an even stronger economic expansion.
Economists also said that, leaving aside gas, cars, construction supplies, and food, retail sales experienced a 0.3 percent rise last month from June and May levels. This means that economic growth outpaced federal expectations of 2.3 percent by 0.7 percent, which may translate into an even steadier economic growth by the end of the year.
Last month, auto dealers reported a 1.4 percent increase in sales, while fast-food chains and construction material stores reported a 0.7 percent increase. Customers also chose to buy more furniture, clothes and sportswear over the course of last month.
In July, gasoline sales ticked despite lower prices dragging sales considerably down. In the last 12 months, gas pump sales plunged 15.2 percent.
Nevertheless, not all domains of U.S. economy performed well last month. Groceries reported no gains, while electronics and department stores recorded losses.
Economists explained that the results may reflect a new trend in consumer spending patterns. Consumers now tend to shop more online, and be less likely to shop for conventional products like clothing. Additionally, when customers hit brick-and-mortar stores they are compulsively looking for bargains.
Two major Department stores Kohl’s and Macy’s reported lower sales and profit for the second quarter. Other retailers like Wal-Mart and Target are expected to report similar results in the next few days.
Macy’s said it had a 26 percent loss in profits and it doesn’t hope sales to go up by the end of the year. Macy’s CFO Karen Hoguet told shareholders that customers are now more interested in food services, health care, electronics and leisure time than in clothing and furniture.
So, Macy’s announced that it plans to open a chain of outlet stores this fall to feed into customer’s obsession with bargains and revive sales.
Image Source: Patrick Fallon Photo
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