Retail Sales Report Shows Big Upward Revisions

Big upward revisions underscore a very solid and very important retail sales report. Retail sales rose 0.6 percent in July with June revised to unchanged from an initial reading of minus 0.3 percent and with May revised to a jump of 1.2 percent from 1.0 percent. The revisions to June and May point to an upward revision for second-quarter GDP. Vehicle sales, as expected, were the standout in July, jumping 1.4 percent to nearly reverse June's 1.5 percent slide and nearly matching May's historic 1.9 percent surge. But even outside vehicles, retail sales were strong with the ex-auto reading rising a solid 0.4 percent. Restaurants, in another strong signal of consumer strength, rose an outsized 0.7 percent following June's 0.5 percent gain. These are very strong gains for this component. Excluding both vehicles and gasoline, retail sales rose 0.4 percent, again another solid reading. Strength in both vehicles and restaurants point to the health of the US consumer and will likely give the hawks the courage, despite all the troubles in China, to push for a rate increase at the September FOMC.

Recent History Of This Indicator: Retail sales are expected to post a solid 0.5 percent gain in July which, if realized, would turn up talk for a September rate hike. Strength in the July report is expected to be centered in motor vehicles though other components are also expected to have good showings. Both the ex-auto reading and the ex-auto ex-gasoline core reading are expected to rise a very respectable 0.4 percent.