As expected, retail sales rise in July

The Commerce Department also raised its figures for June sales to unchanged from the prior estimate of a 0.3 percent decline. That increase slightly exceeds average hourly wage growth of 2.1 percent, a sign that consumers are starting to spend their additional earnings after a prolonged period of caution during the six-year recovery from the Great Recession.

“This report looks solid after a run of disappointing numbers”, said Ian Shepherdson, chief economist at Pantheon Macroeconomics, told the Washington Post. Consumer spending makes up more than two-thirds of economic output, making retail sales a strong gauge of the country’s economic health.

It also added to June data on factory inventories and imports as well as upward revisions to May construction spending figures in suggesting that growth in the second quarter was probably much stronger than the government reported last month.

The Commerce Department’s report showed retail sales excluding autos increased 0.4 percent in July for a second month.

Building materials and garden supplies increased 0.7%. This would reverse the 0.3 percent dip in June.

Consumer spending at motor vehicle and parts dealers continued to strengthen last month, as sales climbed 1.4 percent from June and 6.9 percent year over year.

“It also puts third-quarter consumption growth on a firmer footing”, Ashworth said. “We have a vibrant labor market and the unemployment rate continues to move lower”.

Sales fell at general merchandise stores, department stores and electronics retailers.

The economy is improving as Fed officials debate when to raise interest rates for the first time since 2006.

Financial markets, however, have shifted their rate hike expectations toward December following China’s devaluation of its currency this week.