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First Cut: July retail sales present a solid upside surprise

Retail and food sales in July presented a solid upside surprise by rising 0.7% overall and up 1.0% excluding motor vehicles and parts. Revisions to the prior two months were small and offsetting, and placed the July gain as a strong start to consumer spending in third quarter, building on the momentum of the second.

If sales of motor vehicles and parts were down as expected at off 0.6% in July, most other categories turned in a positive performance. Notable was the 2.8% increase for nonstore retailers that benefited from Amazon.com’s Prime Day event that had competing promotions at many other retailers.

Sales at gasoline stations were up 1.8% in spite of generally lower gasoline prices. The dollar value of sales got a boost from volume during a heavy travel period and possibly also from increased gas taxes in a few populous areas. Vacations may have also helped sales at restaurants (up 1.1%).

Activity in the housing market appears to be translating into some sales for furniture (up 0.3%) and for electronics and appliances (up 0.9%). Homebuying may have done less for building materials in July (up 0.2%) but could provide some upward momentum further down the line. Summer weather and the approach of the school year helped sales for clothing (up 0.8%), although not sporting goods (down 1.1%).

“Core” retail sales — sales excluding motor vehicles, gasoline, and building materials — were up 1.0% in July after up 0.7% in June and 0.8% in May. Altogether, confident consumers are opening their wallets this summer.

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