Is the US Still Headed into a Recession? Here Is What Retail Sales Tell Us

With inflation high and economic reports looking glum, fears of an impending US recession have not been unfounded. New information from the retail sector tells us how likely a recession is.

Several retailers had strong recent quarters that indicated that the US economy is picking up and may be gaining strength, possibly averting a recession. A recession in the United States has massive global implications, causing a trickle-down effect that could lead to recession in other countries that rely on the US for commerce.

Walmart (WMT) had a stronger second quarter than analysts anticipated, which helped to push the stock price much higher than it has been all year. At the start of 2024, the WMT stock price was $52.58, and it is currently at $75.91. While Walmart may be leading retail sales, other retailers are doing well too, indicating a recovery in that industry.

Confidence in the US economy is improving, especially after a positive retail sector report. US retail sales were up for the month of June by 1.1% and up 2.6% from that same period last year.

In July, with the latest retail report, retail sales across the United States were up by 0.3% compared to the previous month. This indicates increased growth on top of the growth that occurred the month before, which is a very positive sign for the market.

Inflation Is Decreasing

At the same time that retail sales are climbing, US inflation is diminishing. Previously at 3% through much of 2024, the inflation rate dropped to 2.9% earlier this month. That caused a stock market boom and allowed the S&P 500 and Nasdaq Composite stock market indices to achieve record highs.

The market was further helped along by decent retail sales figures, and these indicators allowed the Federal Reserve to post a positive outlook on the US economy. The Fed has stated that they intend to cut interest rates soon, and that could happen as early as September.

With multiple positive economic factors in play, the US economy looks to be pulling away from a recession. Walmart is a great gauge of how Americans are spending their earnings, and the company said its revenue increased by 4.2% from the first fiscal quarter of the year. In general, Walmart accounts for 1/12 of all spending from US shoppers.

Walmart’s management says they are seeing stronger US consumers based on spending figures, and they expect that to improve as the year continues.