US retail sales fall as mortgage costs hit spending
Print Edition
US retail sales fell more than expected in July as shortages weighed on purchases of motor vehicles and other goods, but spending on services could keep the economy on a strong growth path in the third quarter.
Retail sales dropped 1.1 percent last month, the Commerce Department said on Tuesday. Online sales tumbled, payback after Amazon pulled forward its Prime Day to June from July. Data for June was revised up to show retail sales increasing 0.7 percent instead of rising 0.6 percent as previously reported. Economists polled by Reuters had forecast retail sales slipping 0.3 percent.
Motor vehicle production has been hampered by a global shortage of semiconductors. The scarcity of chips has also impacted the availability of some household appliances like microwaves and fridges.
鈥淓ven as demand remains strong, motor vehicle sales have continued to fall over the past few months as the semiconductor shortages have made it difficult for consumers to find vehicles they want regardless of the price,鈥 said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina.
Retail sales are mostly goods, with services such as healthcare, education, travel and hotel accommodation making up the remaining portion of consumer spending. Restaurants and bars are the only services category in the retail report.
Part of the cooling reflects the rotation of spending from goods to services like travel and entertainment, with more than 50 percent the United States鈥 population fully vaccinated against COVID-19. Rising infections driven by the Delta variant could slow the services spending boom. The US Centers for Disease Control and Prevention in July urged fully vaccinated Americans to resume wearing masks in indoor public places in areas where the virus is surging.
Excluding automobiles, gasoline, building materials and food services, retail sales fell 1.0 percent last month after an upwardly revised 1.4 percent increase in June. These so-called core retail sales correspond most closely with the consumer spending component of GDP.
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