- Christopher Low, chief economist at FTN Financia
Retail sales in the world biggest economy unexpectedly remained unchanged in July, indicating a slight loss of steam in the economy early in the third quarter. According to the Commerce Department, spending declined at auto dealers and department stores, but were offset by gains in grocery stores, gasoline stations, restaurants. Core retail sales, which exclude automobiles, gasoline, building materials and food services, inched higher 0.1% in July. The data suggest Americans are still reluctant to spend, limiting growth for the economy. Following the data release, the Greenback turned lower versus the 18-nation currency, with EUR/USD gaining 0.07% to trade at 1.3379, compared to 1.3364 ahead of the data.
Separately, another report showed U.S business inventories increased in June, while a modest rise in non-automobile retailers stocks indicates that the growth outlook for the second quarter might be revised a bit lower. The Commerce Department said inventories, which are a key component of GDP changes, rose 0.4% following the 0.5% gain in May, while on an annual basis business inventories were up by 5.8%. Stockpiles are one of the most volatile parts of the GDP, and thus can have a marked impact on the overall pace of growth. A rebound in stockpile accumulation was the main driver of the second-quarter growth of GDP. Inventories made up 166 basis points of the 4% growth rate.
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