Retail sales in July rose +0.5% m/m to a +6.4% y/y rate, exceeding the long-term average of +6.1%. After stripping out volatile components, core sales still rose +0.5% m/m to +4.8% y/y, again exceeding the long-term average of +4.2%. Sales in bars and restaurants are now growing +9.7% y/y. The highly discretionary nature of these sales indicates that the consumer is now more willing to spend. Manufacturing industrial production rose +0.3% m/m to +2.8% y/y in July, the fastest in six years. The increase in headline industrial production of only +0.1% m/m was dragged down by a -0.3% m/m loss in mining and a -0.5% loss in utilities, yet on a y/y basis, the headline grew at a six-year high of +4.2%. Small business optimism as measured by the NFIB survey rose to 107.9, just 0.1 point shy of its 45-year record high. Productivity in Q2 rose +2.9% q/q annualized, the most in three and a half years, but the y/y rate remains weak at only +1.3%. With an aging population, productivity will be the key driver of economic growth for years, perhaps decades to come.
