U.S. retail sales reportedly declined more than experts expected in July due to a lack of purchases of motor vehicles and other goods. However, services spending was able to push the economy to remain in a strong growth phase in the third quarter.
Retail sales declined 1.1% last month based on a report released by the Commerce Department on Tuesday. Online sales also reportedly declined as Amazon accelerated the ‘Prime Day’ event into June. On the other hand, data for June has been revalued showing retail sales increased 0.7% instead of 0.6% as previously reported. The July reading fell above the expectations of economists who forecast retail sales to decline 0.3%.
Motor vehicle production has been hampered by global semiconductor shortages. The lack of chips also limits the production of household items such as refrigerators.
According to Sam Bullard, a senior economist at Wells Fargo (NYSE: WFC) in Charlotte, North Carolina, the demand sector is still strong, only motor vehicle sales have continued to decline in recent months due to semiconductor shortages.
Also influencing the fall in retail sales was the increase in Delta variant infections which slowed the surge in service spending. U.S. Centers for Disease Control and Prevention in late July had urged fully vaccinated Americans to return to wearing face masks in public.
Excluding cars, petrol, building materials and food services, retail sales fell 1.0% last month after a 1.4% increase in June.
It should be noted that retail sales do not account for the bulk of service expenses. The US dollar index reportedly continued to strengthen against major currencies with a 0.35% increase to a reading of 92.945.
