Updated at 10:01 am EST.
The Commerce Department reported on Friday that retail sales in the United States stalled last month, although falling gas prices reduced the headline number, but gave fresh hope to underlying purchases as discretionary spending improved.
The Commerce Department reported that July retail sales were essentially unchanged from the previous month, falling just short of the Street consensus of a 0.8 percent increase. The June total was revised lower, to a 0.8% increase, compared to the original projection of a 1% increase.
The auto industry accounted for 0.4 percent of June retail sales, while stand-alone sales of gasoline fell 1.8 percent as prices recovered from a record high of $5.017 per gallon in June.
"The whole picture here is positive," said Ian Shepherdson of Pantheon Macroeconomics. "The impact of the rise in gas prices is barely visible in these statistics, because many individuals have been willing to absorb the shock by downplaying some of the enormous savings accumulated during the epidemic."
"We anticipated that consumers would take a while to respond to the decrease in gas prices over the previous few months, so this is a pleasant surprise," he added. Expect to see GDP predictions move a bit higher in Q3, and keep an eye on future upward revisions to Q2.
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Following the data release, U.S. markets traded heavily down, with the Dow Jones Industrial Average declining by 180 points, and the S&P 500 moving 28 points to the downside.
Following the data release, benchmark 10-year Treasury note rates rose to 2.891%, while the dollar index rose 0.3% to 106.764 in the same session against six global currencies.
Gas prices played a major role in the softer reading, as the national average cost for a gallon of gas appeared to fall below the $4 mark for the first time since early March this week, driving prices more than 21% lower than their early June highs, following a fifty-day drought.
The closely-tracked control group number, which includes cars, building materials, office suppliers, gasoline station sales, and tobacco, increased by 0.8 percent, exceeding the Street consensus estimate of 0.6 percent and corresponding to the second-highest total of the year.
Inflationary pressures slowed in the month of July, with headline CPI slowing to an annual 8.5% from the 9.1% pace recorded in June and effectively stopping at June levels on a month-to-month basis.