Retail Sales Grow in July as Revised Jobs Data Augurs Cooling Conditions

Retail sales increased for a second consecutive month in July, defying expectations of a slowdown in the wake of the Trump Administration’s tariffs, for now. However, the longevity of continuing positive retail momentum is in question. Tariffs with large trade partners, including China, have been repeatedly delayed and are not yet actually in effect. Retailers additionally built inventories in advance of tariffs, meaning that in-place tariffs have not yet fully worked their way through to consumers. Higher prices resulting from these policies will likely materialize through the remainder of the year serving as a headwind to consumer spending. In addition, there are indicators the economy is moderating. A pronounced slowdown in jobs growth for July, as well as a sharp downward revision to jobs added in the two preceding months, signals a quickly moderating labor market. Cooling housing prices and a recent uptick in corporate defaults similarly point to moderating conditions across the…