WASHINGTON — Americans spent the most money at stores last month in a year and a half, easing concerns that the economy would slow under pressure from higher prices and markups.
The Commerce Department reported Thursday that U.S. retail sales rose 1% from June through July, after falling slightly the previous month. Auto dealerships, electronics and appliance stores and grocery stores all reported strong gains.
Adjusted for inflation, sales rose about 0.8%. And excluding gas station sales, which don’t reflect U.S. shopping sprees, retail sales also rose 1%.
Consumers have been hit hard by the pandemic since high prices and increased interest rates. At the same time, however, average wages have also risen, giving many households the means to continue spending.
Inflation-adjusted wages rose slightly compared to a year ago. High-income households also their wealth increaseswith stock prices and house prices rising over the past three years. Increasing wealth can encourage more spending.
Financial markets had already plunged earlier this month on concerns about the economy after the government announced it would cut hiring. much weaker than expected in July and the unemployment rate rose for the fourth straight month.
However, economic reports since then have shown that layoffs are still low and that service sector activity and employment remain solid. Americans are also still spending on services, such as travel, entertainment and health care, which are not included in Thursday’s retail sales report.
Still, some economists worry that much of U.S. spending is now being fueled by increased use of credit cards. And the percentage of Americans behind on their credit card payments, while still relatively low, has risen.
But cooling inflation could give households a much-needed boost. Consumer prices rose just 2.9% in July from a year earlier, the government said on Wednesday. That was the lowest annual inflation rate since March 2021. And core inflation, which excludes volatile food and energy costs, fell for the fourth straight month.