US retail sales rise 0.8% in July, signal cautious consumer optimism

14 August 2012 21:37  [Source: ICIS news]

WASHINGTON (ICIS)--US retail sales rose by 0.8% in July from June, the Commerce Department said on Tuesday, ending a three-month run of declining consumer spending and suggesting that households are regaining some cautious optimism about the economy.

In its monthly report, the department said that retail sales rose to $403.9bn (€327.2bn) last month.

The July upturn in retail sales is in contrast to declines of 0.2% in both April and May and June’s initially reported 0.5% drop.  In the Tuesday report, June’s retail sales were revised downward to a 0.7% loss.

Consumer spending is the principal driving engine of the US economy, accounting for as much as 70% of all commercial activity and production.

The National Retail Federation (NRF) hailed the July upturn in sales, saying that the gain demonstrates that “consumers are gaining some semblance of confidence this summer”.

Jack Kleinhenz, chief economist at the federation, said that the rise in retail sales last month were particularly encouraging “despite continuing high unemployment and political and fiscal uncertainty”.

“Consumers are spending again, albeit cautiously,” Kleinhenz said.

NRF president Matthew Shay noted that the July gain in sales was part of the expected back-to-school sales surge that typically occurs each year as families with school-age children buy supplies, equipment and clothing for the new academic year that begins in September.

Shay cautioned, however, that the July increase might not be sustained past the school-related surge in spending.

“Sustained retail growth hinges on the ability of Congress and the administration to make smart decisions about the economy and Americans’ confidence in our long-term recovery,” he said.

The Obama administration and Congress are at loggerheads on how to avoid the so-called “fiscal cliff” that threatens the US economy at year end.

At that time, major automatic federal government spending cuts are scheduled to kick in, and income tax rates are to rise when existing Bush-era tax cuts expire on 31 December.

Unless Congress and the White House can agree on ways to soften the budget cuts and restore most if not all of the expiring tax cuts, Federal Reserve Board chairman Ben Bernanke has warned that the US will slip into a new recession in the first half of next year.

Economists say that it is anticipation of that fiscal cliff that has fed anxiety among consumers – and especially among businesses – and made both less willing to spend.

($1 = €0.81)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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