Automobile shortages, spending shift to services tank U.S. retail sales

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ICYMI: U.S. retail sales dropped 1.1% in July on weak autos sales, suggesting a slowdown in economic growth early in the third quarter

closed at record highs on Monday. The dollar rose against a basket of currencies. U.S. Treasury prices were higher.Excluding automobiles, gasoline, building materials and food services, retail sales fell 1.0% last month after an upwardly revised 1.4% increase in June. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously estimated to have accelerated 1.1% in June.

Rising infections driven by the Delta variant of the coronavirus could, however, slow the services spending boom. "We've long held the view that discretionary services would lift overall consumer spending this year as the economy trended back to some semblance of normal," said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina. "But now with the resurgence of COVID, those gains may be more tepid."

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, notched double-digit growth in the second quarter, helping to pull the level of GDP above its peak in the fourth quarter of 2019.

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