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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Strong Q3 US retail sales bolster growth outlook

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WASHINGTON: US retail sales recorded their biggest increase in seven months in July as consumers boosted purchases of motor vehicles and raised discretionary spending, suggesting the economy continued to gain momentum early in the third quarter.


Retail sales for June and May also were revised higher, which should help to assuage concerns about consumer spending after a slowdown at the start of the year. Tuesday’s upbeat report from the Commerce Department likely keeps the Federal Reserve on course to raise interest rates again in December.


“American shoppers flocked to the malls in July, suggesting consumers are well-positioned to propel the economy forward in the second half of the year,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “It should tamp down chatter about the Fed delaying rate hikes until next year.”


Retail sales jumped 0.6 per cent last month, the largest gain since December 2016. June’s retail sales were revised to show a 0.3 per cent gain instead of the previously reported 0.2 per cent drop.


Economists had forecast retail sales increasing 0.4 per cent in July. May’s retail sales were revised to show no change rather than the previously reported 0.1 per cent dip. Retail sales increased 4.2 per cent in July on a year-on-year basis.


Excluding automobiles, gasoline, building materials and food services, retail sales surged 0.6 per cent last month after an upwardly revised 0.1 per cent gain in June. These so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, were previously reported to have dipped 0.1 per cent in June.


The report helped to shift investors’ attention from recent weak inflation data as markets try to forecast the Fed’s next policy move. The US central bank has raised rates twice this year and economists expect it will announce a plan to start unwinding its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities in September.


The dollar rose to near a three-week high against a basket of currencies on Tuesday, while prices for US Treasuries fell. Stocks on Wall Street were mixed. — Reuters


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