July retail sales jumped 0.5% over the previous month, giving investors and consumers some badly needed encouraging news on Friday. After all, it's been a dismal August, with the markets going into convulsions and consumer confidence falling to its lowest level in three decades.

So, naturally, investors and consumers may be asking themselves whether July's encouraging performance can continue on its roll through the anguish of August. One economist thinks so.

"I don't think we'll see a 0.5% increase, but I expect to see a modest increase over July," says Sal Guatieri, senior economist with BMO Capital Markets. "I think one of the things that will help this month are there are more cars on dealership lots, so that should help spur sales."

During July, seasonally adjusted automobile sales climbed 0.5% over the previous month. Not bad, but it doesn't compare with the strong drivers for July. Gas stations, for example, climbed an impressive 1.6%, and electronics and appliance stores weren't far behind, with an increase of 1.4%, according to the U.S. Department of Commerce July report.

The July results were better than Wall Street expected, noted Morgan Stanley (MS) fixed-income economists David Greenlaw and Ted Wieseman in a research note on Friday.

"The key retail control series was better than anticipated in July and there was a significant upward revision to June," Greenlaw and Wieseman pointed out in their report. The Commerce Department revised its June retail-sales figures to 0.3% from its previous 0.1%.

Looking forward to August retail sales, Guatieri says the improvement in the number of jobless claims during the first week in August may help bolster consumers' confidence to spend at retail stores. He noted that there is a tight relationship between employment figures and consumer spending, since, with credit being less available to tap into, more people these days have to rely on their paychecks.

Consumer-confidence figures, surprisingly, don't have an immediate effect on retail spending on a month-to-month basis, Guatieri says. But he noted that if the consumer-confidence figures continually edge down, then that will begin to show up in retail-sales results.

The stock market's gyrations in August can have a tempering effect on retail spending, but although consumers may pull back a little as their portfolios contract, Guatieri says the markets' recent stability over the past several days may help to keep retail spending moving along.

Motley Fool contributor Dawn Kawamoto has no position in any companies mentioned.


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71 Comments

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rlshf46

Personally, I think the market has been manipulated for years. It goes up one day based on good news, and down the next based on a decline in the same thing that made it go up the day before, all while those who manipulate it are getting wealthy. Perhaps we should all just put it in a can and bury it like our Grandparents did.

August should show an increase with so many students furnishing their dorm rooms, but Sept. will not be the same. So, does that mean it will continue to to up, then in Sept. fall? Where is the common sense?

I agree, the media makes it worse!

I saw my IRA loose 50% of its value due to 9/11, plus the Enron & Tyco thieves, and it had just earned back to that level plus some before this recent drop. What amazes me is those who manage our investments aren't smart enough to realize when it sounds too good to be true, it is.

August 15 2011 at 11:07 AM Report abuse -1 rate up rate down Reply
1 reply to rlshf46's comment
warrenbent

You mean the market has been manipulated for years, yet for years you've remained invested in the market?

Brilliant!

August 15 2011 at 4:37 PM Report abuse +2 rate up rate down Reply
1 reply to warrenbent's comment
leetjbgsucjob

LEE . I'M Banging your wife like a loose screen door in a Hurricane. We can make some good money off of her titty pictures . I'll cut you in for 10%.

August 15 2011 at 6:38 PM Report abuse -2 rate up rate down
scoobysncs4u

God is already here on earth. The angels are free to clean up the people who portray themselves as heroes,concerned,honest,forgiving,righteous,supreme,glorified and pretentious. But who are really liars. The angels will remove these people from earth. So the ones who try to make the world a better place can do so without hardship or heartbreak.

August 15 2011 at 10:58 AM Report abuse +1 rate up rate down Reply
slugboy57

so on what planet is 0.5 persent growth mean things are better. the huff and puff post need to stop drinling the obama kool aid. you should have 0.5 present growth in the first week of the mouth.

August 15 2011 at 10:54 AM Report abuse rate up rate down Reply
madmax821

0.5% OMG can you say back to school?????????

August 15 2011 at 8:48 AM Report abuse +2 rate up rate down Reply
garyrjas

So if this article is about an economist stating that he believes August will be better than July, why is the headline is August setting up for a stumble? This is the usual poor reporting and sensationalism (lie) approach by the media. It should read, Economist indicates August could be better than July. Good news doesn't sell I guess.

August 15 2011 at 7:43 AM Report abuse +3 rate up rate down Reply
1 reply to garyrjas's comment
ethernum

It's all about statistic who are supposed to influence the market, economist just have to forecast a very bad situation and when expectation proved wrong then this is called a good news for financial market. A 0,5% jump is close to stagnation, not a jump but if it can raise stock market by speculation. It's called manipulation. Media work in the other way, they sell good news everydays and send bad ones for yesterday or for the future, because nobody want to hear bad news, except when it's very sensational and need an immediate coverage. bad news are sold by media only with this package.

August 15 2011 at 8:15 AM Report abuse +2 rate up rate down Reply
1 reply to ethernum's comment
warrenbent

A 0.5% MONTHLY increase is far from "stagnation". Retail sales have increased 8.5% over the trailing 12 months. These would be solid figures in pretty much an environment.

August 15 2011 at 10:40 AM Report abuse -2 rate up rate down
lghtning50

duh I wonder if august sales are up due to tax free weekends and going back to school sales

August 15 2011 at 6:10 AM Report abuse +4 rate up rate down Reply
veprk

If you look at the comments on the Huffpo stories, it looks like the U.S. economy has never been better. What a scam.

August 15 2011 at 3:38 AM Report abuse +4 rate up rate down Reply
1 reply to veprk's comment
lghtning50

LOL the huff and puff, I was banned from there by the same "moderators that constantly beride the conservatives, to H*LL with the huff and puff

August 15 2011 at 6:09 AM Report abuse +1 rate up rate down Reply
alexkrzyston

For most of the 20th Century the United States enjoyed a dominate position in the world economy. Whether measured by Income, GDP, or standard of living the United States lead the world for most of the past century. As a result nearly all of our national economic strategies have been structure based on this dominate position. National strategies relating to Government Revenue, Government Social benefits, Government Regulations, Consumer Spending, and Foreign Trade share the core the assumption that the United States is both the dominate consumer and producer in the world. The reality of the Global Economy which has emerged in recent decades is that the United States is longer the dominant economy. This has resulted in our core economic strategies being at best outdated, and in many situations harmful to our own country.

While many measures validate the eroding US dominance, the most important is the actual decline in Real Earned Incomes (decreased by -8% from $29,370 in 2000 to $27,020 in 2009). That the rest of the world is growing faster than the US is less important the fact that our Real Earned Incomes and standard of living is declining.

Alex Krzyston

August 15 2011 at 2:58 AM Report abuse +5 rate up rate down Reply
1 reply to alexkrzyston's comment
ethernum

And when incomes decline, consumption too, so as long as there's massive unemployement no need to hope for a real jump in retail sales, and the wealthiest earning 100 time the average of the lowest salary will never spend 100 time more. Wealthy is saving or investing, but not redistribute money into consumption.

August 15 2011 at 8:27 AM Report abuse +2 rate up rate down Reply
nottenkamper

THink about it...school starts in August in a lot of States...so parents and students have to get supplies for school. Does anyone out there think about the whys?

August 15 2011 at 12:56 AM Report abuse +5 rate up rate down Reply
1 reply to nottenkamper's comment
Setanta

and with the uncertainty of our money,people are running to te stores and doing the best they can on bsics too.

August 15 2011 at 1:23 AM Report abuse +1 rate up rate down Reply
theteleprompter

Gee Obama what a great idea to make July look good , shhhhhhh tele dont talk so loud people may remember that mothers shop for school uniforms and supplies in July . Ok Obami I wont tell but to you think they will catch on at holiday time ? Shhhhhhh Tele I plan to make unemplyment look less when stores hire part time Holiday help .

August 15 2011 at 12:23 AM Report abuse +3 rate up rate down Reply
1 reply to theteleprompter's comment
HiBarbRayAndMeg

If you believe Obama has any influence on July sales I have a bridge to nowhere to sell you. Keep up the spin, one of these days you will be correct.

August 15 2011 at 1:06 AM Report abuse -1 rate up rate down Reply