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US retail sales beat expectations on almost all measures. Upbeat retail sales figures – alongside other robust statistics – are good news on their own, but they could eventually become bad news by discouraging politicians from acting, according to FXStreet’s analyst Yohay Elam. 

Key quotes

“V-shaped recovery – that is what retail sales figures for July reflect for the US economy, and that was already seen in June. Overall expenditure increased by 1.2% last month, while below 1.9% expected, it was more than compensated by an upward revision to June’s figures. Moreover, the all-important Control Group – ‘core of the core’ which is used in growth calculations – is up 1.4%, better than 0.8% projected and also here, on top of an upward revision.”

“The robust recovery is sales is a result of massive government support – which kept consumption in line with an economy running on full employment according to Micahel Gapen of Barclays. While the slowdown is seen in the figures, the positive marks may turn negative without additional help. Republicans and Democrats let the July 31 deadline lapse without a deal. Trump’s executive orders stipulate only $300/week – and have yet to be implemented. Support to small business and states is unclear.”

“The current figures may encourage lawmakers to claim that additional assistance is unnecessary, or can be further reduced. The results of pulling support away will be seen only later in August, and most probably only in September. By then, more Americans could lose their jobs and temporary position losses could turn permanent.”