Economic Preview: Retail sales expected to show rare glimmer in July after devastating run

Retail sales probably rose in July for the first time in three months, according to data set to be released this week, but that’s not expected to be much relief for a sector taking a battering.

The Commerce Department report on retail sales, due Tuesday, may show a gain of 0.3% in July.

That’s little solace for the likes of Macy’s M, -0.24%  and Kohl’s KSS, -2.18%  , as shoppers avoid the mall and shop from home.

Department-store sales have sagged 3.9% in the 12 months ending June, while electronic shopping and mail-order house sales have rocketed 12% over the same time period, according to Commerce Department data.

The dominant electronic shopping player, Amazon AMZN, +1.16%  , held its Prime Day event in July, creating “upside risk” to the report, according to economists at Credit Suisse. 

Retail sales also have been impacted as vehicle sales — after being juiced by subprime loans and the need to replace aging vehicles — have cooled since peaking in December. Auto makers reported a slight pick up in sales in July. A separate report from the Labor Department showed a big drop in new vehicle prices in July.

Altogether, retail sales have been disappointing at a time when job growth has been solid, consumer confidence has been strong, and household balance sheets have been mending.

Also on the agenda in the coming week are the minutes from the Federal Open Market Committee, which will come out Wednesday. The big decision — to finally start the reduction of its $4.5 trillion balance sheet — has been endorsed by dovish and hawkish central-bank officials alike, and is expected to be announced in September.

The question of whether to raise interest rates by another quarter-point has been punted to December. Chicago Fed President Charles Evans said last week that the Fed should be “very careful” in assessing the need for future rate hikes. He said there would be “many more months of inflation data” to chew over at the December meeting.

With those big issues out of the way, the potential for a jarring surprise is diminished.

Rounding out the week are reports on industrial production, housing starts and consumer sentiment.

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