Retail Sales Signal Stronger Economic Growth

August 16, 2013 | Lili Park, Vice President, Client Service

Given that consumption constitutes roughly 67% of U.S. GDP, it is not surprising that the trends of retail sales are closely watched to reveal emerging growth or contraction in the economy. In an effort to uncover evidence of economic expansion in the U.S., our chart of the week examines the monthly change of retail sales over the last six years, with a focus on the last few months of 2013. In particular, the past four consecutive months of gains in retail sales provide some additional optimism about GDP growth for the second half of the year. While July fell short of expectations growth was still positive (a 0.2% gain in retail sales), though not as strong as June’s increase of 0.6%. The United States Commerce Department stated that business surpluses were unchanged in June while sales sprouted, which implies that companies will need to restock their inventory in the coming months. In turn, economic growth should follow. Overall, this contributes to the growing confidence about the U.S. economy: gains in employment, growing home and equity prices, rising household wealth and more accessible consumer credit are translating into better growth in retail sales and the broader economy.