WASHINGTON (AP) — Americans increased retail spending last month by the most in a year and a half, easing concerns that the economy is weakening under the pressure of higher prices and rising prices.
The U.S. Commerce Department reported Thursday that U.S. retail sales rose 1% from June to July, after declining slightly the previous month. Auto dealers, electronics and appliance stores, and grocery stores all reported strong gains.
Adjusted for inflation, sales rose by about 0.8 percent. And excluding gas station sales, which do not reflect Americans’ willingness to shop, retail sales also rose by 1 percent.
Since the pandemic, consumers have suffered from high prices and rising interest rates. At the same time, however, average wages have also increased, allowing many households to continue to spend money.
Inflation-adjusted wages have risen slightly compared to last year. The wealth of higher-income households has also increased, and stock prices and real estate values have soared over the past three years. Increases in wealth can lead to higher spending.
Financial markets collapsed earlier this month on economic fears after the government reported that hiring in July was significantly weaker than expected and the unemployment rate rose for the fourth month in a row.
But economic reports since then have shown that layoffs remain low and activity and hiring in the services sector remain stable. Americans also continue to spend money on services such as travel, entertainment and health care, which are not included in Thursday’s retail sales report.
Still, some economists worry that much of Americans’ spending is fueled by increasing credit card use. And the percentage of Americans who default on their credit card payments, while still relatively low, is rising.
But the cooling of inflation could give households the boost they need. Consumer prices rose just 2.9 percent in July compared to the same period last year, the government said on Wednesday. That was the lowest inflation rate since March 2021. And core inflation, which excludes volatile food and energy costs, fell for the fourth month in a row.
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