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US Retail Sales Power Dollar

Posted by Joseph Trevisani on Aug 15, 2017 12:48:20 PM

Stronger than expected retails sales in July gave the dollar a boost and raised estimates for the strength of the U.S economy in the third quarter.

Overall consumer spending jumped 0.6 percent, the best gain in seven months and twice the median estimate according to the Commerce Department on Tuesday.  June's 0.2 percent decline was revised to a 0.3 percent gain and May also received an upward adjustment. Sales excluding automobiles and gasoline rose 0.5 percent after the prior month's 0.3 percent increase. 

Annual sales rose to 4.2 percent in July from 3.8 percent in June. 

The  dollar responded by lurching higher against its major counterparts, reaching a two week high against the euro and the yen, a two month top versus the pound and advancing per the Australian, Canadian and New Zealand Dollars and the Swiss Franc.

The so-called 'retail-sales control group', the Commerce Department category excluding food service, auto sales, building materials, which is used by the government to estimate GDP rose 0.6 percent following June's 0.1 percent gain.

The Atlanta Federal Reserve GDPNow forecast for annualized GDP growth in the third quarter climbed to 3.7 percent after the sales report, up from 3.5 percent on August 9th. The estimate for the personal consumption contribution to GDP rose to from 1.91 percent to 1.97 percent based on the retail sales figures.  

Gains were broad based with 10 of 13 retail categories moving higher.  On-line retailers jumped 1.3 percent after June's 1.0 percent increase. They were 11.0 percent higher on the year.  Car dealers had their biggest increase in purchases this year, 1.2 percent in July subsequent to 0.9 percent in June, largely driven by widespread sales incentives.  Department store sales climbed 1.0 percent, the most in six months, somewhat relieving the gloom in that sector and receipts at sporting goods stores and building supply firms rose the most since February.

Gasoline station receipts fell 0.4 percent.  Sales figures are not corrected for price changes and the reported drop likely mirrors fuel price declines. Electronics goods and clothing stores also reported July sales decreases.

Retail sales figures do not include services and thus cover just under half of all household purchases.

 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Zerohedge, WorldWideMarkets

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