This is being touted as a strong report, but, again, looks to me like it’s dropped since year end and at best is moving sideways from there, and not to forget that a large share of auto sales are imports.

But I do agree the Fed is heck bent on raising rates in Sept, even without ‘some’ improvement, and will do so unless there’s a stock market decline severe enough to hold them back. So far that’s not happening.

Retail Sales


Highlights
Big upward revisions underscore a very solid and very important retail sales report. Retail sales rose 0.6 percent in July with June revised to unchanged from an initial reading of minus 0.3 percent and with May revised to a jump of 1.2 percent from 1.0 percent. The revisions to June and May point to an upward revision for second-quarter GDP.

Vehicle sales, as expected, were the standout in July, jumping 1.4 percent to nearly reverse June’s 1.5 percent slide and nearly matching May’s historic 1.9 percent surge. But even outside vehicles, retail sales were strong with the ex-auto reading rising a solid 0.4 percent. Restaurants, in another strong signal of consumer strength, rose an outsized 0.7 percent following June’s 0.5 percent gain. These are very strong gains for this component. Excluding both vehicles and gasoline, retail sales rose 0.4 percent, again another solid reading.

Strength in both vehicles and restaurants point to the health of the US consumer and will likely give the hawks the courage, despite all the troubles in China, to push for a rate increase at the September FOMC.

Tough times for department store sales continue, which explains some of the weakness in construction:

‘Some’ deterioration:

Jobless Claims

‘Some’ deterioration for Fed hopes of higher inflation. It’s been failing to hit its target for longer than I can remember…

Excess inventory building in June helps Q2 GDP but the likely subsequent production cuts will hurt Q3. The now persistently too high inventory to sales ratio is overdue for a correction:

United States : Business Inventories


Highlights
Inventories rose relative to sales in June but the news isn’t that bad given that the build was centered in autos. Business inventories rose 0.8 percent in June which was well ahead of a 0.2 percent rise in sales. The mismatch lifts the inventory-to-sales ratio to 1.37 from 1.36.

But retail inventories at auto dealers were to blame, up 1.4 percent in June and contributing to a 0.7 percent rise for the retail component. Inventories at manufacturers and wholesalers, the two other components of the business inventory report, also rose, up 0.6 and 0.9 percent respectively.

Inventories are on the heavy side but the concentration in autos is welcome given how strong sales are, evidenced by the 1.4 percent surge for the motor vehicle component of the July retail sales report released earlier this morning. Note that this report, along with the retail sales report, are likely to lift revision estimates for second-quarter GDP.

Global weakness continues:

Japan : Machine Orders


Highlights
June seasonally adjusted machine orders (excluding volatile items) declined for the first time since February. They dropped a larger than anticipated 7.9 percent on the month and were up 14.7 percent on the year. Core orders were up 16.6 percent based on the original series. This was in contrast to expectations of a 17.5 percent increase.

Core machine orders are considered a proxy for private capital expenditures. The downward move followed a 0.6 percent gain a month before. The government repeated its assessment that machine orders would advance in the third quarter.

Nonmanufacturing orders excluding volatile items were up 5.0 percent while manufacturing orders dropped 14.0 percent. All orders including volatile items dropped 6.2 percent on the month. Manufacturing orders likely softened on continued weaker export demand while the sluggish domestic economy weighs on nonmanufacturers.”

Another weak looking index:

And I’d call this ‘some’ deterioration in the ‘labor market’. Looks like it was weakening before the 2014 oil capex boom supported it, and then has fallen off since the oil price collapse:

This is to the point I’ve been making that surveys are one man one vote, not one dollar one vote, so optimism remained high even as retail sales, for example, were fading. Yes, a lot more people saved $10 per week on gas but an equal amount of income was reduced for sellers of oil, including those earning royalties and holding leases, and investors of all sorts, and seems the spending cuts on domestic product by that group outweighed the additional spending from pump savings.

Fueled by low pump prices, U.S. motorists to drive more in August – survey

By Jarrett Renshaw

August 11 (Reuters)

U.S. motorists are paying an average of $2.58 per gallon, nearly a dollar less than a year ago, according to AAA, the nation’s largest motorist advocacy group. And a quarter of respondents expected prices to continue to decline, up from 10 percent a month ago.

The survey found that nearly 80 percent of people say gas prices influence how they feel about the economy. And with gas prices down nearly $1 from a year ago, U.S. motorists are feeling positive about the direction of the economy, the survey found.

“There is good news for retailers as consumer optimism picks up during peak vacation season,” said NACS Vice President of Strategic Industry Initiatives Jeff Lenard.