WASHINGTON — Americans spent the most money at stores last month in a year and a half, easing concerns that the economy would slow under pressure from higher prices and markups. The Commerce Department reported Thursday that U.S. retail sales rose 1% from June through July, after falling slightly the previous month. Auto dealerships, electronics and appliance stores, and grocery stores all reported strong gains. Adjusted for inflation, sales rose about 0.8%. And excluding gas station sales, which don’t reflect U.S. shopping sprees, retail sales also rose 1%.
Consumers have been hit hard by the pandemic since high prices and increased interest rates. At the same time, however, average wages have also risen, giving many households the means to continue spending. Inflation-adjusted wages rose slightly compared to a year ago. High-income households also saw their wealth increase with stock prices and house prices rising over the past three years, encouraging more spending.
Financial markets had already plunged earlier this month on concerns about the economy after the government announced it would cut hiring much weaker than expected in July, and the unemployment rate rose for the fourth straight month. However, economic reports since then have shown that layoffs are still low and that service sector activity and employment remain solid. Despite this positive trajectory, some economists remain concerned about the potentially increased reliance on credit card spending.
Cooling inflation could provide households with a welcome respite. Consumer prices rose just 2.9% in July from a year earlier, the lowest annual inflation rate since March 2021. Core inflation, which excludes volatile food and energy costs, fell for the fourth consecutive month. While there may be challenges and uncertainties ahead, Americans’ willingness to spend and the overall economic resilience remain noteworthy factors in navigating the current landscape successfully.
