US retail purchases expected to bounce back sharply in July

Consumers probably opened their wallets with gusto in July. Retail and food services sales jumped by 1.0% last month, erasing the surprisingly weak -0.3% print recorded in June. The projected pickup in activity is expected to be broadly based during the reference period. Buoyed by solid demand for sport utility vehicles and luxury nameplates, unit motor vehicle purchases rebounded to a seasonally adjusted annual rate of 17.5 million during the reference period, eclipsing the 17.1-million Q2 average. After adjusting for prices and different seasonal adjustments between the unit volume and value series, auto-dealership revenues likely climbed by about $950 million, adding two ticks to headline sales last month. Net of the projected strength in motor vehicle purchases, retail sales probably expanded by 0.9% - the largest one-month gain since March. 

Further adjusting for forecasted increases in building materials purchases (2.6%) and gasoline service-station receipts (0.6%), retail control - the portion of the Census Bureau's advance report that is used by government statisticians to produce nominal consumer goods spending estimates - is expected to climb by 0.8%, erasing the 0.1% prior-month downtick. Projected snapbacks in clothing, furniture, miscellaneous and online purchases, along with stepped-up spending at food service and drinking places, are expected to fuel the anticipated gain. In particular, a mid-month promotional campaign at a major etailer should provide a boost to such sales in July. 

"Our estimate would place the closely followed spending metric in July 3.8% annualized above its April-June average, almost matching the 4.1% spring-quarter gain," says Societe Generale.