Consumers spent less than expected in July as a pull in vehicle sales helped cool an economy by struggling to shake off the effects of the coronavirus pandemic.
Retail sales rose 1.2% for the month, against the expected 2.3% increase from economists surveyed by Dow Jones.
The news was not all confusing: With the exception of vehicles, profit was 1.9%, ahead of the estimate of 1.2%. A separate report also showed that worker productivity grew at its fastest pace in 11 years, with annual growth of 7.3% for the second quarter and well ahead of the retirees estimate of 1.5%.
Considered a wake-up call for an economy that takes two-thirds of its business from consumers, retail saw an 8.4% increase in June that includes huge gains in furniture and equipment sales. This June number was already strong at 7.5% but was revised higher.
However, those gains cooled as a revival in the Covid-19 cases caused the reopening activities to slow down.
Electronics and equipment sales increased monthly sales by 22.9% while clothing increased by 5.7% and bars and restaurants, an industry which was particularly affected by the coronavirus, increased by 5%.
Vehicle parts and dealers reported a 1.2% slide, lowering the number of securities. Sporting goods and bookstores saw a 5% decline while home and garden suppliers reported a 2.9% decline.
Overall, it still recorded its third straight monthly gain for retail, which fell to 14.7% in April, then retreated to 18.3% in May as a sharp closing in March to stop the virus from thawing.
The last three months show that “consumer spending has risen to record high levels,” said Chris Rupkey, a beloved financial economist at MUFG Union Bank. “There can still be no recession in the country if the consumer is going through their hearts like this.”
The future of the economy, and specifically consumer health, remains an issue. Prolonged unemployment benefits which had given displaced workers $ 600 a week over their normal benefits expired July 31, and Congress still looks sharply divided over what the next bailout will look like.
“Given persistently high unemployment, retail sales in August and fall will rely on a large scale over time and the extent of more government assistance,” said Robert Frick, corporate economist at the Navy Federal Union of Credit.
Even with GDP at 32.9% in the second quarter, calculated on an annual basis, consumers were still responsible for 67% of spending. Unemployment has fallen, but is still at 10.2%, while Thursday’s unemployment claims report also showed a slower easing but with 28.3 million Americans still reaping benefits.