US households have surprised economists with the size of retail spending in July. According to the latest advance U.S. retail sales numbers released by the U.S. Census Bureau, figures indicated retail sales increased by 0.6% during July, well in front of the 0.3% expected and up on June’s revised figure of 0.3%. On a yearly basis, the increase was 4.2%, up from June’s comparable figure of 3.4% (after revisions).
In dollar terms the increase was driven predominantly by vehicle/parts sales as well as sales of building material and gardening equipment. However, the largest percentage increase came from the “non-store” category which increased by 1.3% for the month and 11.5% for the year. Non-store sales currently account for around 11% of total retail sales.
According to ANZ’s Daniel Gradwell, the figures were “were much stronger than expected” and the numbers “point to strong consumption at the start of Q3 and possible upward revisions to the Q2 GDP figures.” He thinks the U.S. economy is at “above-trend” levels that is why FOMC member William Dudley and other support “another rate rise later this year.”
US bond yields moved higher by the end of the day. Both 2 year and 10 year Treasury yields increased by 2bps on the day to 1.35% and 2.27% respectively.