U.S. retail sales increased more than expected in July as Americans boosted online purchases and dined out more, suggesting the economy continued to expand early in the third quarter and keeping a recession at bay.
The report from the Commerce Department on Tuesday also showed consumers splurging on hobbies, sporting goods and clothing, underscoring their resilience despite the Federal Reserve's aggressive interest rate hikes to tame inflation.
"As long as core inflation continues to fall rapidly, resilient growth won't in itself be enough to prompt further rate hikes from the Fed," said Andrew Hunter, deputy chief U.S. economist at Capital Economics. Prime Day promotion last month, which was the biggest on record and likely pulled forward some spending from August. Online sales accelerated 1.9% after rising 1.5% in June.
But the value of sales at auto dealerships fell 0.3% after rising 0.7% in June. Receipts at furniture stores dropped 1.8% and electronics and appliance store sales declined 1.3%. Stocks on Wall Street were trading lower as investors worried about further rate hikes. The dollar fell against a basket of currencies. U.S. Treasury prices were mixed.Most economists, however, believe the Fed is probably done raising rates, and they are increasingly warming up to the idea that the U.S. central bank could steer the economy toward a "soft landing" rather than the recession they had been forecasting since last year.
"It is encouraging that nonfuel prices remain subdued, which has offset some of the impact from higher fuel prices, but also signals that disinflationary pressure is widespread," said Matthew Martin, a U.S. economist at Oxford Economics in New York.
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