NEW YORK (CNNfn) - Retail sales in the United States were unchanged in July, the government reported Tuesday, a better performance than analysts expected, as consumer spending continued to hold its ground during a prolonged slowdown in the world's largest economy.|
Retail sales in July were $291.7 billion, virtually unchanged from June's revised figure of $291.6 billion, which was also flat compared to May's $291.7 billion, the Commerce Department reported. Economists surveyed by Briefing.com expected July retail sales to fall by 0.2 percent.
Excluding volatile automobile sales, retail sales rose 0.2 percent from June after falling 0.2 percent between May and June. Economists expected retail sales excluding autos to rise 0.1 percent.
"This is consistent with the view that the U.S. economy really is on the road to recovery," said Bill Cheney, chief economist with John Hancock Financial Services. "Consumers are not pulling back. Consumer spending is going to get us into a second half 2001 rebound."
U.S. stocks opened slightly higher while U.S. Treasury bond prices fell.
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Consumer spending, which makes up two-thirds of the U.S. economy, has been a major force in helping the nation avoid a recession during a slowdown in the past year.
Economists worried that a recession in the manufacturing sector and hundreds of thousands of job cuts would dampen consumer enthusiasm, and the Federal Reserve has slashed its target for short-term interest rates six times this year to keep consumers spending and avoid a recession.
The Fed is widely expected to cut rates again when it meets Aug. 21 to discuss policy. While most analysts think the Fed will cut rates by a quarter percentage point, to 3.5 percent from 3.75 percent, recent dire economic news -- and a pessimistic tone to the Fed's periodic "beige book" report on the state of the economy -- had convinced some observers they could go as low as 3.25 percent.
"This doesn't change the picture at all for a quarter [percentage] point
[rate cut]," said Carol Stone, deputy chief economist at Nomura International Securities. "Expectations for [a half-percentage-point cut] might fade a little bit. There's some firmness to these numbers, so it's not as dire as people had begun to think after last week's beige book."
Hoping for a better August
The Fed's rate-cutting efforts, which usually take months to filter through the economy, may be starting to pay off -- with the possible assistance of tax-rebate checks, part of President Bush's tax relief package, which began arriving in taxpayers' mailboxes late last month.
"Looks to us like tax rebate money is being spent," said Ian Shepherdson, chief economist at High Frequency Economics Ltd. "Retailers should have a good autumn."
Retailers are hoping rebate checks and back-to-school sales will help improve August sales after a shaky July.
July retail sales were weighed down by the recent decline in gasoline prices. Purchases at gas stations fell 4.2 percent. Excluding gas station sales, overall July retail sales were up 0.3 percent. Retail sales data are not adjusted for price fluctuations.
While the July data were slightly stronger than anticipated, June retail figures were revised downward to a flat reading from a previously reported 0.2 percent gain.
Sales at automobile dealerships fell, while sales of sporting goods, health and personal care products and clothes all posted healthy gains. Consumers also ate out more last month.
Consumer confidence could get a jolt later this week, as separate government reports on July business inventories, due Wednesday, and the June trade balance, due Friday, could undercut the already shaky second-quarter U.S. gross domestic product (GDP) figure.
Economists say GDP, the broadest measure of economic growth in the U.S., could even dip into negative territory if inventories fall and the trade gap widens more than expected. A recession is usually defined as being two consecutive quarters of GDP contraction, which the economy has avoided so far.
- from staff and wire reports