BofA forecasts July retail sales drop of 0.4% on Prime Day shift

Investing.com -- Bank of America expects July retail sales to fall 0.4% excluding autos, well below market consensus, due to Amazon's Prime Day moving from July to June this year.

The bank projects the control group, which excludes autos, gas, building materials and restaurants, to decline 0.6% for the month.

Bank of America's credit card data showed a sharp drop in online retail sales in July after Prime Day and related promotions were pulled forward to June. Multiple retail categories posted monthly declines, including clothing, gas due to lower prices, and furniture.

Additional factors contributing to July's weakness included a heat wave around the July 4 weekend and a post-World-Cup effect, according to the bank. The tournament ended on July 19, with more than 75% of games played in June.

The spending slowdown was broad-based across categories, the bank said.

Bank of America noted that June retail sales came in far below its forecast based on card data, which may reduce the downside risk to July's Census Bureau report.

The bank characterized July's weakness as temporary rather than a sustained trend. Real consumer spending remained strong at 3.2% quarter-over-quarter in the second quarter GDP report. The bank pointed to a low unemployment rate, stock markets at all-time highs, and falling gas prices as supporting factors for consumer health.

Bank of America's latest card data showed spending growth was stronger among lower-income households than higher-income households in each of the four weeks ending August 1. This pattern held even in discretionary categories, with lower-income spending remaining solid while higher-income spending cooled modestly.

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