MACRO: Auto purchases weigh on US retail sales

US retail declined 1.1% from a month earlier in July, following a revised 0.7% jump in the previous month and compared with analysts' expectations of a 0.3% drop, led by a decline in auto purchases and reflected the recent shift of spending from goods to services following the reopening of the economy. Receipts were down at motor vehicle & parts dealers (-3.9% vs -2.2% in June), building material & garden equipment & supplies dealers (-1.2% vs -1.4 %), food & beverage stores (-0.7% vs 0.8%), furniture stores (-0.6% vs -2.2%), clothing stores (-2.6% vs 3.7%), and sporting goods, hobby, musical instrument, & book stores (-1.9% vs -1.8%). In addition, on-line trade dropped 3.1 % (vs 0.2% in June), after Amazon shifted its Prime Day to July from June. US retail trade excluding autos fell 0.4 % from a month earlier in July, following a revised 1.6 % increase in June and compared with Economists projections of a 0.1 % gain, according to US Census Bureau.

US Retail Sales dropped 1.1% MoM in July - almost four times worse than the 0.3% slide expected primarily because of weaker auto sales while the boost to spending from the economy's reopening and stimulus checks faded, which may point to a slowdown in economic growth early in the third quarter. Source: Bloomberg via ZeroHedge 

Control group data fell 1.0% while analysts expected only 0.2% decline, which is concerning as it affects GDP reading. Source: Bloomberg via ZeroHedge

Today's report showed a steady shift in spending toward services and indicating consumers may be growing more price conscious as inflation picks up. Economists forecast that consumer spending will grow at an annual rate of 4.5% in the current period, much slower compared to last month's estimate and a sharp slowdown from the staggering 11.8% in the second quarter. If the current situation continues in the near future and the labor market recovery slows down, then the earlier introduction of tapering will be questionable.