Retail sales in the US rose more than anticipated in July.

As Americans raised their online purchases and increased their dining out, U.S. retail sales climbed more than anticipated in July, indicating that the economy continued to grow early in the third quarter and preventing a recession.

The Commerce Department reported on Tuesday that retail sales increased 0.7% last month. Sales for June increased by 0.3% instead of the previously reported 0.2%, according to updated data.

Reuters polled economists, who predicted retail sales would increase by 0.4%. The majority of retail sales are of products, and therefore are not inflation-adjusted. They probably benefited from Amazon's Prime Day sale last month.

Due to high pay growth brought on by a tight labour market, demand has held up despite the Federal Reserve's aggressive interest rate increases to control inflation.

The buying power of consumers is increasing as inflation declines. Additionally, households are borrowing money to pay for purchases.

Although lower-income people have used up their COVID-19 of surplus savings, there is still a sizable volume of money set aside to encourage consumer spending.

Most economists think the Fed is likely done raising rates now that inflation is declining, and they are starting to become more open to the concept that the Fed may direct the economy towards a "soft landing" rather than the recession that they had been predicting since last year.

Since March 2022, the Fed has increased its benchmark overnight interest rate by 525 basis points, bringing it to the current range of 5.25%-5.50%.

Retail sales increased 1.0% in July when cars, petrol, construction supplies and food services were excluded. These so-called core retail sales increased by 0.5% in June instead of the previously estimated 0.6%, according to updated data.

The portion of GDP that represents consumer spending most closely resembles core retail sales.

The majority of the American economy—more than two-thirds—is based on consumer spending. Even while consumer spending dropped in the second quarter from the first quarter's strong pace, the gain was still sufficient to propel the economy to an annualised growth rate of 2.4% from April to June.

(Sources: investing.com, reuters.com)