US retail sales expected to begin the summer on a high note

Providing an early glimpse at summer-quarter consumer spending activity, the Census Bureau's Advance Report on Retail and Food Services Sales in July will be the marquee statistical event of the week. Increased spending across a wide variety of retail outlets and restaurants likely propelled headline purchases one percentage point higher during the reference period, following a surprising 0.3% contraction in the previous month. Of particular importance, retail control - the portion of the upcoming release used by government statisticians to estimate consumer goods purchases - probably climbed by 0.8% - the strongest gain in four months.

With consumers' outlays on services expected to continue apace during the reference period, nominal personal consumption expenditures (PCE) likely expanded by 0.6%, triple June's reported rise. Net of forecasted hikes in retail goods and services costs last month, real PCE likely increased by 0.4%, placing July's inflation-adjusted spending level 2.1% annualized above the April-June average, after a 2.9% Q2 gain.

"Our projection's would be consistent with a further reacceleration in GDP growth during the summer and a liftoff in administered rates at the Federal Open Market Committee's September 16-17 meeting", says Societe Generale.