Retail Sales and Industrial Production

This morning, we got two economic reports. The retail sales report for June was quite good. The Commerce Department said retail sales rose 0.4% last month. The numbers for May were revised down to 0.4% from 0.5% growth. Excluding automobiles, gasoline, building materials and food services, retail sales jumped 0.7% last month.

June’s strong gain in core retail sales, coming on the heels of solid increases in April and May, suggested a sharp acceleration in consumer spending in the second quarter.

Consumer spending grew at its slowest pace in a year in the first quarter. Spending is being supported by a tight labor market, even as the broader economy is slowing as weaker business investment, an inventory overhang, a trade war between the United States and China, and softening global growth pressure the manufacturing sector.

The data probably will have little impact on market expectations that the Federal Reserve will cut interest rates this month for the first time in a decade. But signs of strong consumer spending and rising core inflation suggest the U.S. central bank is unlikely to cut rates by 50 basis points at its July 30-31 policy meeting as markets had initially anticipated.

The industrial production report for June was flat. Economists were expecting an increase of 0.2%. Production for manufacturing and mining increased but that was erased by the decline in utilities.

Capacity utilization, which reflects how much industries are producing compared with what they could potentially produce, slipped by 0.2 percentage point to 77.9% in June. Economists had expected 78.1%.

Industrial production has struggled this year, due in part to trade-related headwinds. For the second quarter as a whole, industrial production declined at a 1.2% annual rate, dropping for the second quarter in a row.

Broader economic growth was strong in the first quarter and the labor market has continued to add jobs.

Posted by on July 16th, 2019 at 11:51 am


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