American retail chains reported that by the end of July, an increase in consumer spending in this trading sector was recorded.
The final result in this case became an indicator formed on the basis of a combination of several factors. One of the circumstances that contributed to the growth of consumer spending was the high level of the cost of goods provoked by inflation. Also, in this case, the influence factor was the increase in the level of buyer demand. Another important circumstance in the context of assessing the reasons for the July result is the growth in retail sales, which has been recorded for the fourth month in a row.
The US Department of Commerce on Tuesday, July 15, reported that the level of retail sales in July increased by 0.7% compared to June. At the same time, experts predicted that this indicator will grow by 0.4%.
According to the results of last month, the highest level of consumer interest in durable goods is observed in the structure of buyer spending. This product category includes clothing and sporting goods. Sales growth in bars and restaurants was also recorded in July.
The volume of sales of goods with a service life of at least three years demonstrated the dynamics of decline. In furniture stores, the sales figure decreased by 1.8% compared to the result for June. In electronics and home appliance stores, a decrease in sales was recorded by 1.3%.
In the foreseeable future, gas prices, which have reached the highest level in the last 10 months, may affect retail trade indicators.
The July result is a kind of evidence of the financial stability of American consumers, whose material situation is currently under the influence of factors such as high-interest rates and inflation, which is also at a high level. This week, retail giants such as Walmart, Target, and the parent company of TJ Maxx, TJX will publish reports on the results of operations in the second quarter of this year. These indicators will complement the idea of the state of American consumers in terms of their financial capabilities, which determine the level of purchasing power.
Nikki Baird, vice president of strategy at Aptos, a retail technology company, noted in an analytical note that the inflation factor continues to be sensitive. According to her, in the United States, from the point of view of the average trend, consumer income is lower than the volume of costs. At the same time, she said that against the background of rising debt and high-interest rates in July, there was no decrease in the level of purchasing activity, which may occur in September due to payments on student loans.
Over the past few months, a decrease in the rate of inflation has been recorded in the United States, but the current dynamic is within the limits exceeding the Fed’s target of 2%. The consumer price index last month showed an increase of 3.2% compared to the level of 2022. The price index of personal consumption expenditures for the 12-month period ended in June increased by 3%.
The media reports that the US economy is showing impressive resilience. The stability of the system is fixed against the background of 11 interest rate increases as part of the implementation of the Fed’s strategy to combat inflation from March 2022. Residents of the United States have spent a lot of money on going to cinemas to watch the Barbie film and attending concerts by Beyonce and Taylor Swift.
Wall Street bankers and Fed economists have changed their forecasts about the likelihood of a recession in the United States amid the positive dynamics of the economy this summer. In recent months, a decrease in the level of activity has been recorded in the American labor market, but at the same time, the situation remains within the limits of stability. This state of affairs is positive for the economy on a global scale. Americans continue to get jobs.
Gregory Daco, chief economist at EY-Parthenon, noted in his note that there is optimism about the prospects for economic development and the dynamics of inflation, which is still increasing. At the same time, he stated that consumers adhere to the tactics of caution when making decisions about actions related to the use of their financial resources since price increases and rate increases do not contribute to carelessness and an absolute lack of concern about tomorrow in its subject-material configuration. The expert also predicts a slowdown in employment growth in the coming months.
The student loan repayments planned for the near future and the possible next increase in the Fed rate indicate that the continued existence of the economic situation will not be cloudless. In September, the heads of central banks will decide on interest rates, which may increase for the 12th time in the current cycle of growth dynamics. Some economists believe that the consequences of the Fed’s policy of raising rates have not fully manifested themselves, and the full scale of their impact is something that the economy has yet to face.
Also, some retailers are recording signs of weakening demand within their business. In the future, this trend may cause a decrease in the level of profit.
Wells Fargo economists say that the level of consumption of goods is stable, although the share of costs associated with paying for services is increasing in the structure of household spending. They also stated that retailers operating in the online environment, bars, and restaurants are showing good results in terms of financial turnover. But at the same time, economists stressed that sales of about half of retailers volumes are currently below last year’s level adjusted for inflation. This is a sign of the gradual beginning of weakening demand, which has not yet become a general trend and characteristic inherent in the entire system.
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