The Commerce Department revealed that US retail sales rose to 0.2% in July. The "core" retail sales category that excluded cars, gas and building materials also rose 0.5%, its biggest leap in seven months. Since "core" retail sales also give a more comprehensive picture of consumer spending, Reuters reported this could also be a sign of the improvement in the US economy. Growth was largely inhibited in the first half of 2013 because of cuts in the federal budget and tax increases.
The reduction of unemployment rate to nearly one percentage point in 2012 may have also helped. Economist Paul Dales of Capital Economics in London observed, "Households may be spending a bit more freely in response to the recent gains in employment."
The increase in consumer spending could also support the case for the reduction of the US Federal Reserve of its monthly purchases. Under its quantitative easing (QE) program, the Fed buys USD 85 billion worth of long-term bonds each month. QE was meant to improve employment and lower borrowing costs. Economists believe that the recent sales data could mean that the Fed could start curtailing its bond purchases by September.
Join the Conversation