U.S. retail sales rebounded in July as households boosted purchases of automobiles and a range of other goods, suggesting solid momentum in the economy early in the third quarter. The upbeat report from the Commerce Department on Thursday should strengthen expectations of a Federal Reserve interest rate hike as early as next month. Although another report showed a rise in new applications for unemployment benefits last week, the trend pointed firmly to a tightening jobs market.
Retail sales increased 0.6 percent last month, broadly in line with economists expectations. June's retail sales were revised up to show them unchanged instead of the previously reported 0.3 percent drop.
The retail sales report added to July's fairly upbeat employment and small business confidence reports in suggesting the economy was growing at a steady clip at the start of the third quarter. GDP expanded at a 2.3 percent annual pace in the April-June quarter.
In a separate report, the Labour Department said initial claims for state unemployment benefits increased 5,000 to a seasonally adjusted 274,000 for the week ended Aug. 8. Though claims have risen for three straight weeks, they have for 23 consecutive weeks remained below the 300,000 threshold, which is associated with a firming job markets.
Given the steadily firming economy, many economists expect the Fed will raise its short-term lending rate in September for the first time in nearly a decade. Financial markets have shifted their rate hike expectations towards December following China's devaluation of its currency this week.
There are no key announcements today.