Retail sales were little changed in July, the worst performance in six months, as car demand slowed and tepid wage growth restrained U.S. consumers.
The slowdown in purchases followed a 0.2 percent advance in June, the Commerce Department reported today in Washington. The median forecast of 82 economists surveyed by Bloomberg called for a 0.2 percent gain. Excluding cars, sales rose 0.1 percent.
Job growth has yet to stoke the type of wage gains needed to boost household purchases, a sign the economic expansion will probably not sustain the second-quarter pickup into the end of the year. Some retailers must rely on promotions and discounts to entice customers, whose spending accounts for about 70 percent of the economy.
“We’re seeing decent but not great consumer spending,” Christopher Low, chief economist at FTN Financial in New York, said before the report. “Credit is limited and wage growth is stagnant.”
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Stock-index futures held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in September climbed 0.4 percent to 1,938.9 at 8:32 a.m. in New York.
Estimates in the Bloomberg survey ranged from a decline of 0.1 percent to a 0.6 percent gain. June’s reading was unrevised.
Eight of 13 major categories showed an increase in sales last month, paced by clothing, grocery and personal-care stores, today’s report showed.
The labor market, while improving, has yet to return to full strength. Job openings rose in June to the highest level in more than 13 years, the Labor Department reported yesterday. Employers have added more than 200,000 jobs in each of the past six months, the best performance since 1997.
Nonetheless, inflation-adjusted average weekly earnings dropped 0.2 percent in the 12 months through June, the worst performance since October 2012, according to Labor Department data.
Among retailers, auto dealers have benefited from pent-up demand and easy access to credit, with car and truck sales up 6 percent in July from the same month in 2013, today’s Commerce data showed. Purchases cooled last month, falling 0.2 percent from June. At the same time, vehicle sales are on track for their best year since 2006.
General Motors Co., Toyota Motor Corp., Ford Motor Co., Nissan Motor Co. and Chrysler Group LLC reported volume gains of 9 percent or greater in July from a year earlier, with industrywide sales up 5 percent, according to Autodata Corp. Analysts predict 16.3 million total sales for 2014.
At Toyota, sales were up 11.6 percent last month, the company’s best July in seven years, Vice President Bill Fay said.
“There’s every reason to believe the auto industry can maintain these levels in the months ahead,” Fay said on an Aug. 1 earnings call.
“The low interest-rate environment gives consumers a great chance to come in and get very affordable financing or a very good lease deal, which I think has, in part, fueled the strength of the industry this year,” Fay said. “With interest rates forecasted to stay pretty low, I think that’s certainly one component of all of our optimism going forward.”
Core retail sales, which excludes categories such as cars, gas stations and building materials, climbed 0.1 percent in July following a 0.5 percent increase the prior month that was smaller than previously reported. Core sales are used to calculate gross domestic product.
Discounts and promotions remain popular. Tanger Factory Outlet Centers Inc., based in Greensboro, North Carolina, reports 98 percent occupancy at its discount shopping malls and tenants want to expand their offerings, President and Chief Executive Officer Steven Tanger said.
“The great majority of them are looking to grow their businesses,” Tanger said on an Aug. 6 earnings call. “They tell us they’re allocating more capital to the outlet distribution channel than other distribution channels. So we’re excited about the demand for our properties.”
The world’s largest economy grew at a 4 percent annualized rate in the second quarter after contracting 2.1 percent in the first three months of the year, its worst performance since 2009, during the final stages of the recession.