Consumers powering economy
But higher interest rates are weighing on economic activities that are highly dependent on credit, like sales of homes, vehicles, furniture and electronics, according to Bill Adams, chief economist for Comerica Bank in Dallas. Furniture and home furnishings stores and electronics stores remained weak, registering declines. And sales at motor vehicle and parts dealers also were down from the prior month.
Still, the uptick reflects the economy's resiliency despite a still challenging economic environment of still high prices and higher interest rates that make borrowing on credit cards and getting a mortgage for a home more expensive. Yet spending has been volatile this year after surging nearly 3 percent in January. Sales tumbled in February and March before recovering in April and May.
The report comes as inflation has cooled but not enough to meet the Federal Reserve's target rate.
Inflation in the United States edged up in July after 12 straight months of declines.
But excluding volatile food and energy costs, socalled core inflation matched the smallest monthly rise in nearly two years. That's a sign that the Federal Reserve's interest rate hikes have continued to slow price increases.
The inflation data the government reported last week showed that overall consumer prices rose 3.2 percent from a year earlier. The latest figure remained far below last year's peak of 9.1 percent, though still above the Fed's 2 percent inflation target.
Overall prices, measured on a month-to-month basis rose 0.2 percent in July; roughly 90 percent of it ref lected higher housing costs. Excluding shelter, Paul Ashworth of Capital Economics calculated that core prices actually fell 0.1 percent from June to July.
A slew of earnings results from big companies like Walmart, Target and Macy's this week and next should offer some more clues on shoppers' mindset and how they will manage inflation and higher interest rates in the latter half of the year including
the critical holiday season.
Moreover, a student loan moratorium – which allowed Americans to divert money that used to go to loan payments to dinners out and new furniture — ends later this year.
The government's monthly retail sales report offers only a partial look at consumer spending; it doesn't include many services, including health care, travel and hotel lodging.