US retail sales rebounded in July as households boosted purchases of automobiles and a range of other goods, suggesting solid momentum in the economy early in the third quarter.
The upbeat report from the Commerce Department yesterday should strengthen expectations of a Federal Reserve interest rate hike as early as next month.
Although another report showed a rise in new applications for unemployment benefits last week, the trend pointed firmly to a tightening jobs market.
“The strong retail sales report should go a long way in supporting September rate hike odds as the upcoming Fed decision continues to hinge crucially on the tone of domestic economic momentum,” said Cheng Chen, an economist at TD Securities in New York.
Retail sales increased 0.6 per cent last month, broadly in line with economists’ expectations. June’s retail sales were revised up to show them unchanged instead of the previously reported 0.3 per cent drop.
Excluding automobiles, gasoline, building materials and food services, retail sales rose 0.3 per cent after a revised 0.2 per cent gain in June. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
Core retail sales were previously reported to have dipped 0.1 per cent in June.