Economists cheer as consumers end 2Q in high gear

The Wall Street Journal says consumers “flexed their muscles” in June. For Reuters, the 0.6 percent gain in retail sales for the month was important for what it said about second-quarter growth.
Publish date:
Social count:
The Wall Street Journal says consumers “flexed their muscles” in June. For Reuters, the 0.6 percent gain in retail sales for the month was important for what it said about second-quarter growth.

The Wall Street Journal says consumers “flexed their muscles” in June. For Reuters, the 0.6 percent gain in retail sales for the month was important for what it said about second-quarter growth.

All of the nation’s major business news outlets had encouraging things to say about the U.S. economy after the Commerce Department surprised forecasters who had expected a more modest increase in consumer spending.

Excluding autos, retail sales rose 0.7 percent from May. Economists surveyed by the Journal expected that such sales would climb a more modest 0.4 percent.

Friday’s report was “supportive of our outlook for a consumer-driven bounce-back in second-quarter growth,” the Journal quoted Barclays economist Rob Martin as saying in a note to clients.

An economist who spoke to Reuters was cautiously optimistic as he looked toward the second half of the year.

"While this sort of growth will be hard to emulate in the third quarter, most of the positive fundamentals supporting the consumer remain in place, particularly the healthy state of the labor market," said Michael Feroli, of JPMorgan in New York.

Bloomberg noted that households are benefiting from continuing job creation and slowly rising wages.

“This ends up capping a really great quarter for consumer spending,” Omair Sharif, senior U.S. economist at Societe Generale in New York, told Bloomberg. “There’s a bit more confidence about job security, there’s a bit more confidence about where things are headed in terms of wages and the economy. All of that is combining to give us the rebound we’re seeing in retail sales.”

Bloomberg said 11 of 13 major retail categories showed stronger demand in June from the prior month.

MarketWatch said home-and-garden centers and online stores led the way, noting that sales at businesses such as Home Depot and Lowe’s rose 3.9 percent, the best gain since 2010. Purchases such as these represented 42 percent of the increase in retail sales for the month.

Combined with the 287,000 jobs the Labor Department previously said the economy created in June, the retail sales gains show the economy is poised for a strong second half, bolstered by consumers feeling newly empowered by their new jobs.

Inflation, of course, becomes a concern as the economy heats up. The Labor Department said the Consumer Price Index rose 0.2 percent in June for the second consecutive month.

Bloomberg said the increase was attributable to a rebound in fuel prices and sustained gains in rents and noted that inflation is getting closer to the level that could trigger the Federal Reserve to push up interest rates.

“We’re starting to see upward pressure on the inflation numbers,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics Ltd., told Bloomberg before the report was issued. “It reinforces the case for the Fed to resume tightening, though they’re highly risk-averse right now.”

Consumers’ mood, as reflected by the University of Michigan’s Consumer Sentiment Index, does not quite line up with the optimistic picture that the Commerce Department report painted. The university said Friday that its preliminary index for July was 89.5, down from 93.5 at the end of June.

Richard Curtin, chief economist for the university’s Surveys of Consumers, said the decline was attributable to increased concerns about the prospects for the national economy that were raised mainly by high-income households. They’re worried about the effect that the United Kingdom’s decision to leave the European Union will have on the United States.

“Prior to the Brexit vote, virtually no consumer thought the issue would have the slightest impact on the U.S. economy,” Curtin said in a statement. “Following the Brexit vote, it was mentioned by record numbers of consumers, especially high-income consumers.”

“For these households, the initial impact on domestic stock prices translated Brexit into personal wealth losses,” Curtin added. “While stock prices quickly rebounded, an underlying sense of uncertainty about global prospects, as well as the outlook for the domestic economy, have not faded.”

Overall, investors have largely shrugged off their initial Brexit concerns. The Dow Jones industrial average had its fourth straight record close on Friday and all three major U.S. stock indexes finished the week higher for the third week in a row.

Today we will get a look at the Commerce Department’s report on housing starts and building-permit numbers for June. Economists think starts will be flat with the June pace of 1.164 million at a seasonally adjusted annual rate.

On Thursday we will get a look at existing-home sales for June. The forecast is for sales at a seasonally adjusted annual rate of 5.45 million, down from the pace of 5.53 million in May, although that represented the strongest reading in more than nine years.


Yamaha sponsors Jacksonville show

Yamaha has signed on as the presenting sponsor of the Jacksonville In-Water Boat Show that runs April 13 -15 at Metropolitan Park and Marina in Jacksonville, Fla.

Volvo Penta announces contest

Volvo Penta of the Americas is asking new engine owners to submit stories to its inaugural Boating Dreams contest and will award the winner with a Chevrolet Silverado pickup.

MIASF volunteers collect 32 tons of trash

The Marine Industries Association of South Florida and the Marine Industry Cares Foundation, organizers of the 41st Annual Broward County Waterway Cleanup held on March 3, collected 32 tons of trash from 31 sites around the county.

New Jersey saltwater fishing show opens today

The Progressive Saltwater Fishing Expo opens today, nearly doubling its footprint as it moves from the Garden State Exhibit Center in Somerset, N.J., to the larger, more centrally-located New Jersey Convention and Exposition Center in Edison, N.J.