Robust U.S. Retail Sales Offer Economic Reassurance

U.S. retail sales rose by 1.0% in July, higher than expected, following a revised decline of 0.2% in June. This increase may alleviate concerns about an economic slowdown prompted by a rising unemployment rate. Core retail sales, which exclude autos, gas, building materials, and food services, rose 0.3%.

In a reassuring sign for the economy, U.S. retail sales surged by 1.0% in July, significantly exceeding expectations and alleviating market fears of a looming economic slowdown. This follows a downwardly revised 0.2% decline in June, according to data released by the Commerce Department's Census Bureau on Thursday.

Economists surveyed by Reuters had predicted a modest 0.3% increase in retail sales, which primarily include goods and are unadjusted for inflation. The unexpected rise in consumer demand is likely to temper expectations for a steep 50 basis points interest rate cut next month, with odds now favoring a more modest quarter-point reduction amid mildly rising inflation in July.

Consumers continue to spend by seeking bargains and opting for cheaper alternatives. Last month, retail sales excluding automobiles, gasoline, building materials, and food services climbed by 0.3%, building on an unrevised 0.9% gain in June. These core retail sales are a crucial indicator of the consumer spending component of the gross domestic product (GDP), positioning retail sales on sturdy ground as the third quarter begins.

(With inputs from agencies.)