U.S. Retail Sales Surge Amid Auto Demand and Big Promotions

U.S. retail sales grew in July driven by strong automotive demand and major promotions by Amazon and Walmart. Nevertheless, challenges such as labor market softening and rising goods prices may impede consumer spending growth. The gain in retail sales could partly stem from tariff-induced price hikes rather than volume increases.

In a robust display of consumer activity, U.S. retail sales saw a notable increase in July, largely attributed to strong demand for motor vehicles and promotional events by retail giants like Amazon and Walmart. According to the Commerce Department, sales rose by 0.5% in July following a revised leap of 0.9% in June.

The automotive sector received a particular boost as consumers rushed to purchase electric vehicles ahead of the expiration of federal tax credits at the end of September. Amazon extended its sales promotions to 96 hours, offering substantial discounts which attracted consumers battling inflation.

However, challenges remain as the softened labor market could hinder growth in consumer spending. A Bank of America report highlighted a growing wage gap, indicating that lower-income households might face reduced hours even if they aren't losing jobs. Core retail sales, a strong indicator of GDP, showed consistent growth.

(With inputs from agencies.)