WASHINGTON (Reuters) – U.S. retail sales were flat in July as lower gasoline prices weighed on revenues at gas stations, but consumer spending appeared to hold firm, which could further ease fears that the economy is already in recession.
Retail sales were flat last month after a downwardly revised 0.8 percent increase in June, the Commerce Department said on Wednesday. It was previously reported that retail sales rose 1.0% in June.
Economists polled by Reuters had forecast a 0.1% rise in sales, forecasting a decline from as low as 0.3% to as high as 0.9% growth varies. Retail sales are mainly commodities and are not adjusted for inflation.
Consumer prices were unchanged in July as gasoline prices retreated from record highs, reducing annual inflation to 8.5% from 9.1% in June.
After hitting an all-time high of just over $5.00 in mid-June, the national average gasoline price fell to around $4.27 a gallon in the last week of July, according to motorists advocacy group AAA . The average price at a gas station on Wednesday was $3.943 a gallon.
Excluding autos, gasoline, building materials and food services, retail sales rose 0.8% last month after rising 0.7% in June.
These so-called core retail sales are closest to the consumer spending component of GDP. They were previously reported to have risen 0.8% in June.
Consumer spending grew at the slowest pace in two years in the second quarter. The modest growth was offset by weakness in business and government spending and residential investment, leading to a second straight quarter of gross domestic product contraction. But the economy may not have slipped into recession as the labor market maintained a brisk pace of job growth and industrial production hit a record high in July.
Nonetheless, the Fed’s aggressive rate hikes to curb demand and curb inflation leave the economy vulnerable to a downturn. The US central bank has raised policy rates by 225 basis points since March.
Core retail sales held steady even as Americans learned to shift spending toward services such as dining, entertainment and air travel to live with the COVID-19 pandemic.
High inflation has made consumers more price-sensitive, causing retailers to overstock, forcing them to offer price discounts. Retail leader Walmart said on Tuesday that it had cleared most of its summer seasonal inventory, but still had work to do in reducing inventories of electronics, homewares and apparel.
(Reporting by Lucia Mutikani; Editing by Paul Simao and Mark Porter)
