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US economy gains momentum with July retail sales at 7-month high

US economy gains momentum with July retail sales at 7-month high

WASHINGTON: US retail sales recorded their biggest increase in seven months in July as consumers boosted purchases of motor vehicles and lifted discretionary spending, suggesting the economy continued to gain momentum early in the third quarter. Retail sales for June and May also were revised higher, which should help to assuage concerns about consumer spending, But persistently sluggish wage growth has pushed Americans to dip into their savings to fund spending. Economists say wage growth has to pick up to sustain consumer spending. “American shoppers flocked to the malls and even department stores in July, suggesting consumers are well-positioned to propel the economy forward in the second half of the year,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. The Commerce Department said on Tuesday that retail sales jumped 0.6 per cent last month, the largest gain since December 2016. June’s retail sales were revised to show a 0.3 per cent gain instead of the previously reported 0.2 per cent drop.

Economists had forecast retail sales increasing 0.4 per cent in July. May’s retail sales were revised to show no change instead of the previously reported 0.1 per cent dip. Retail sales increased 4.2 per cent in July on a year-on-year basis. Excluding automobiles, gasoline, building materials and food services, retail sales surged 0.6 per cent last month after an upwardly revised 0.1 per cent gain in June. These so-called core retail sales, which correspond most closely with the consumer spending component of the gross domestic product (GDP), were previously reported to have dipped 0.1 per cent in June. Prices of US Treasuries extended losses after the data while the dollar gained against a basket of currencies. US stock index futures were trading higher. Consumer spending, which accounts for more than two-thirds of US economic activity, increased at a 2.8 per cent annualised rate in the second quarter. That boosted GDP growth to a 2.6 per cent rate in the April-June period. The acceleration in consumer spending in the second quarter came at the expense of savings, a trend that economists say is unsustainable. Annual wage growth has struggled to break above 2.5 per cent.