U.S. retail sales grows strongly in July, economy likely to grow 3 pct in Q3

The U.S retail sales grew strongly in July, coming above consensus expectations. The retail sales were up 0.6 percent sequentially, as compared with consensus forecast of a 0.3 percent rise. The June’s print was also upwardly revised from an earlier reported drop of 0.2 percent to a rise of 0.3 percent.

Stripping autos and gas, sales grew 0.5 percent in the month, following a revised 0.3 percent rise in June. The ‘control group’, which excludes autos, gas, food services and building materials, also grew 0.6 percent in the month, with the June data upwardly revised to a rise of 0.1 percent from a fall of 0.1 percent.

Category wise, the largest gains were in miscellaneous, non-store retailers, building materials, and departments stores. There were drops in electronics, gasoline stations and clothing. With the headline figure and the positive revisions, this report is better than anticipated and implies that the consumer is in much better shape heading into the third quarter of the year, noted TD Economics. This solid showing should be sufficient to push economic growth to about 3 percent in the third quarter and suggests slightly stronger growth in the second quarter as well.

Given continued job growth and gradually accelerated wages, there is good reason to expect consumers to continue to lead the economic outlook in the coming months, stated TD Economics. For the U.S. Fed, continued strength in real activity is balanced by continuing softness in inflation. This implies a warry approach to normalizing policy. The fed funds rate target is expected to stay stable in September, added TD Economics.

At 15:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was bullish at 83.702. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest