In its latest quarterly report, Walmart reported revenue grew 8.4%, while online sales also jumped, driven by increasing grocery sales. But Walmart said attempts to shift inventory by cutting prices, along with more shoppers buying food instead of other items, put pressure on future profits. Home Depot also saw an increase in sales for the second quarter and reaffirmed its outlook for the remainder of the year—the company expects total sales for the entire year to grow by roughly 3%. I don’t normally do deep dives into quarterly reports, but major retailers like Walmart, Target, and Home Depot could offer us important signals about where the U.S. economy is headed. When the retail sector does well, it means Americans are continuing to go shopping. And if we all keep buying, that means the economy can continue to grow. Shares of Walmart were up over 7% on the news, boosting shares of other retailers like Target, as Walmart’s results raise the likelihood that Target might also beat estimates. Details from the government’s retail sales report for July, due tomorrow, will also provide a broader snapshot of consumer spending around the country. If retail spending gives us a positive surprise like the labor market did, stocks could soar on optimism that a recession isn’t here (yet). Separately, a report from the Census Bureau showed that new residential home construction (“housing starts”) dropped a steep 9.6% in July as high construction costs continue to weigh on homebuilders. Permits to build homes also dropped by 1.3% last month. As higher prices and mortgage rates lead more prospective buyers to choose to sit on the sidelines (or cancel sales altogether), builders have been feeling less optimistic about the housing market. This article originally appeared in ‘The Balance Today’ newsletter. You can get ‘The Balance Today’ delivered to your inbox daily, just sign up here.
