US Retail Sales Rebound

US RETAILS SALES

According to the U.S. Census Bureau, retail and food service sales were up 0.6% for the month of July. In what will likely be a boon for all markets after a surprisingly weak June, the report shows retail sales beating the consensus estimate of 0.5%.

This is especially good news for the United States amid a devaluation of China’s yuan, which rocked all asset classes across the globe. The dollar has also seen strong gains, moving from $1.1154 against the Euro to $1.103 as the US markets open. Investors will likely see continued strength throughout the day.

What led the rise

Rising employment, still-cheap gasoline and stronger finances helped draw consumers out of their homes to spend money. Such growth in household spending will likely continue to encourage the Federal Reserve to move toward raising interest rates for the first time in almost a decade.

“The consumer-driven recovery of the economy continues on track,” said Harm Bandholz, chief U.S. economist at UniCredit Group in New York, in an interview with Bloomberg. “The fundamentals are all in place for solid consumer spending. The outlook remains strong for the second half of the year.”

There were increases in sales at clothing, building materials and garden equipment, furniture and online retailers, as well as at restaurants and bars.

Receipts at sporting goods and hobby stores rose 0.9 percent, but sales at electronics and appliance stores fell 1.2 percent.

Auto sales were one of the big drivers of the growth, with sales at dealerships growing 1.4% after sliding 1.5% in June. Internet sales, led by Amazon’s (AMZN) Prime Day and Wal-Mart’s (WMT) competing Rollbacks, also helped lead the rise. While many have speculated that the big sale day was either a publicity stunt on Amazon’s part or an attempt to clear out their warehouses in preparation for Black Friday, the company said that sales surpassed last year’s Black Friday.

This is especially good news as the retail industry ramps up for year-end sales. With back-to-school sales in August and September, and consumers getting ready for the holidays starting in October, we’ll likely see even more gains through the end of the year.

The job market

In a separate report released on August 7, the Labor Department showed steady job growth for the month of July with 215,000 new jobs. While the unemployment rate remains unchanged at 5.3%, it’s a far cry from the 10.1% it reached in late 2009 and economists expect the rate to sink below the crucial 5% mark by the end of 2015 or beginning of 2016.

Unemployment benefits increased 5,000 to 274,000 for the week ending August 8, according to the Labor Department. Though claims have risen three straight weeks, they have stayed below the 300,000 threshold, which is a sign of a firm job market, for 23 consecutive weeks.

Good news all around

The current economic recovery is largely consumer-driven, which is good news for the US markets. With continued signs of recovery in jobs and consumer spending, we’ll likely see markets follow that trend upward.