Consumer strength continues to be a bright spot in the economy. In July, retail sales were flat – they grew 0%. After adjusting for cooling month-over-month inflation, consumers spent at a constant rate in July.
Why it matters: As the economy continues to suffer under the weight of high inflation, many analysts expect consumer spending to buckle, but it hasn’t. This gives hope that consumer strength can keep the economy afloat while the Fed raises interest rates to fight inflation.
Be smart: One thing to watch in the coming months is interest-sensitive spending categories. The housing market is cooling with interest rates rising. We should expect a similar decline for other spending that relies on borrowing.
- For instance, in July, spending on cars and parts fell 1.6%. The continuing supply chain issues with automotives make it hard to discern whether it was that ongoing problem or a lessening of demand because of rising interest rates.
- Also in July spending at gas stations fell 1.8% as prices came down.
By the numbers:
- Sales were up at furniture stores (0.2%), electronics and appliance stores (0.4%), building material and garden supply stores (1.5%), food and beverage stores (0.2%), health and personal care stores (0.4%), sporting goods and hobby stores (0.1%), miscellaneous stores (1.5%), non-store retailers (2.7%), and food and drinking places (0.1%).
- They were down at motor vehicles and parts dealers (1.6%), gas stations (1.8%), clothing and accessory stores (0.6%), and general merchandise stores (0.7%).
—Curtis Dubay, Chief Economist, U.S. Chamber of Commerce