July Retail Sales Rock, Productivity Soars

Buoyant consumer sentiment boosted retail sales more than expected in July, while bigger than expected productivity gains point toward lower inflation and possible wage gains.

Retail sales, which are the total receipts at stores that sell merchandise and related services to final consumers, rose 0.5 percent in July, according to data released by the Commerce Department Wednesday. Economists had expected sales to rise by just 0.1 percent. The sales numbers were so strong that they exceeded the top range of expectations of economists surveyed by Bloomberg.

Outside of auto and gas sales, retail sales grew an even stronger 0.6 percent.

Productivity, which has had very small gains or even retreated in recent years, rose 2.9 percent in the most recent quarter compared with the prior quarter. That topped expectations for gains of 2.5 percent and was far above the paltry 0.4 percent increase in the first quarter. Productivity measures the growth of labor efficiency in producing goods and services. Rising productivity can hold back inflationary pressures even when the labor market is tight. It can also lead to higher wages in the longer run.

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