- U.S. retail sales fell 1.1% in July from the prior month
- The Federal Reserve could begin tapering its $120 billion in monthly asset purchases later this year
- IHS Markit predicts that vehicle production will be cut by 7.1 million cars due to semiconductor chip shortages
Top Three Market Headlines
Retail Sales Slump in July: The U.S. Department of Commerce reported last week that sales of goods and services recorded by online retailers, restaurants, and brick-and mortar stores declined in July for the second time in three months, falling 1.1% from June's level. Motor vehicle sales, constrained by dwindling inventory and rising prices, declined 4.3%, while online retailers saw a 3.1% drop. On the bright side, restaurants and bars continued to rebound in July, showing a 1.7% rise over the month. Although sales decreased over the month, they were still well above 2020 pandemic-impacted levels, with July's total of $91.9 billion exceeding the prior year by almost 16%.
Fed Signals Tapering is Likely to Start This Year: A majority of Federal Reserve governors indicated support for starting to unwind easy-money policies later this year, according to minutes of the Fed's late-July meeting that were released last week. The Fed could begin to taper its $120 billion in monthly asset purchases at any of the remaining policy meetings this year provided the economy evolves as anticipated. However, Fed officials broadly agreed that "substantial further progress" still has not been made in regards to employment, suggesting they are not considering raising interest rates in the near-term.
Chip Shortage Continues to Hinder Automakers: A shortage of semiconductor chips continues to disrupt auto industry production, with two of the world's largest carmakers last week announcing fresh assembly lines suspensions. Ford stated it has been forced to halt production of its signature F-150 pickup, while Toyota said it would pause output at 14 plants and slash production by 40% due to semiconductor-related part shortages. Many of the semiconductors found in vehicles are produced in Southeast Asia, which continues to struggle with virusinduced business shutdowns. IHS Markit, a global information and analytics provider, has predicted that as many as 7.1 million vehicles will be cut from production this year alone due to the chip shortage.