U.S. Retail Sales Grow For Fourth Consecutive Month

By Sam Lewis

Americans regaining employment is fueling the turnaround

American retail sales gained 0.2 percent in July, immediately following the larger than expected 0.6 percent gain made in June, according to the U.S. department of commerce. The median forecast of the 81 economists surveyed by Bloomberg was a 0.3 percent gain for June.

More Americans are becoming employed (2.28 million workers were added to payrolls this year, dropping unemployment to 7.4 percent, the lowest in more than four years, according to figures from the department of labor), which raises household wealth. This is tied directly to higher home values and stock prices, which boosts spending confidence and triggers improved sales numbers. If consumer spending — accounting for nearly 70 percent of the economy — continues to gain momentum, progress will be made in countering government cutbacks that have stymied economic growth. “We’re seeing sales pick up in multiple categories — that’s a promising sign that consumer spending might be a little bit stronger in the third quarter,” said Michael Brown, an economist with Wells Fargo Securities in Charlotte, NC. “We’ve seen wage and salary growth continue to expand with the pace of employment. That’s helped support some additional consumer activity.” Bloomberg’s data indicates Wells Fargo as the top forecaster of retail sales.

Nine of 13 major retail categories exhibited gains last month. Leading the way was the broad category that included sporting goods, hobby, book and music stores, which had a 1% sales increase last month, with an increase of 3.9 percent for the year. Next was clothing and accessories stores with 0.9 percent increase, with a 5.3 percent increase for the year. Health and personal care stores’ sales jumped 0.7% accompanied by a 3.3 percent increase for the year. The department of commerce also reported that inventories at U.S. retailers have changed minimally as sales have improved, which indicates new orders will be placed to manufacturers to accommodate for growth.

The sting of this year’s tax increases and spending cuts is beginning to subside in the minds of consumers. This, tethered with rising employment rates, has led to newly found optimism in the retail world. Economists are forecasting positivity in third-quarter spending as sales have increased in multiple categories this summer. Combined with an already “cautious optimism” for retail sales during the holiday season, it seems that for a large part of the economy, the outlook is on the upswing.