"Ain't No Stoppin' Us Now" is a 1979 disco song performed by R&B duo McFadden & Whitehead. American consumers agree. For a long time now, their doubters warned that a low savings rate, flatlining real disposable income, rising consumer debt, and mounting affordability challenges would force households to retrench. Instead, they continue to do what they do best, namely shop! A well-balanced labor market and the wealthiest retiring generation ever continue to power consumer spending.
Let's review the latest upbeat developments:
(1) Retail Sales. Retail sales (including food services) rose 0.2% m/m in June after a 1.0% gain in May (chart). The slowdown largely reflected a 5.3% drop in gasoline station sales as pump prices fell by roughly 50 cents per gallon. Excluding gasoline but including food services, sales increased a solid 0.7%, with gains across the board. Nonstore retail sales jumped 1.9%, the largest monthly increase in a year, likely boosted by Amazon's Prime Day. Encouragingly, control group sales, a key input into GDP goods spending, rose by 0.5%. For Q2 as a whole, control-group sales advanced at a remarkable 9.2% annualized rate.
