US retail sales flat in July after 3 months of solid gains

WASHINGTON – U.S. retail sales were unchanged in July from the previous month, a sign that consumers were cautious after three months of solid gains.

Americans spent less at clothing shops, sporting goods stores and electronics and appliance outlets, the Commerce Department said Friday. Spending at grocery stores fell by the most in more than five years. Those declines were offset by big increases in auto sales and online and catalogue sales.

Much of the overall weakness also reflected a steep fall in gas station sales, which largely reflects lower prices rather than lower demand. Excluding gasoline, retail sales rose 0.2 per cent.

Steady hiring and some signs of rising wages have boosted Americans’ confidence. That has encouraged more consumer spending, which jumped in the April-June quarter by the most in 18 months.

Indeed, consumers’ willingness to spend has been one of the few sources of growth this year. The economy expanded at a tepid annual pace of just 1 per cent in the first six months of 2016 despite healthy consumer spending in the April-June quarter.

July’s flat reading on retail sales followed a 0.8 per cent increase in June. Sales had increased 0.2 per cent in May after a hefty 1.2 per cent gain in April.

Retail sales figures can be heavily influenced by changes in prices, particularly in categories like gasoline. Gas station sales dropped 2.7 per cent in July, largely because of lower prices at the pump. The average price for a gallon of gas was $2.13 nationwide on Friday, according to AAA. That’s down 10 cents from a month earlier.

There were some signs of consumer strength in Friday’s report: Auto sales rose a solid 1.1 per cent, and sales for online and catalogue retailers increased 1.3 per cent. Sales in that category have soared 14.1 per cent in the past year, evidence that Americans are increasingly shifting to online shopping.

Employers are hiring at a robust pace, having added 255,000 jobs in July and 292,000 in June — the most in eight months. That’s kept the unemployment rate at a low 4.9 per cent, even as more Americans have started looking for work.

Strong job gains and low unemployment are starting to pressure employers to raise pay. Higher wages would likely fuel more spending in coming months. Many economists forecast that annualized economic growth will rebound to a 3 per cent pace in the current July-September quarter.