US retail spending flatlined last month, but underlying consumer demand remained strong, keeping monetary tightening expectations aloft. According to figures published by the Census Bureau this morning, total receipts at retail stores, online sellers and restaurants were roughly unchanged on a month-over-month in July, up 10.3 percent over a year prior. Markets were expecting a 0.1 percent headline gain.

Gas station sales fell -1.8 percent month-over-month as global energy prices tumbled. Motor vehicle and parts dealers posted a -1.6 percent loss.

Receipts at food services operations rose 0.1 percent, and grocery store sales were up 0.2 percent, but rising food prices were likely a major factor.

Sales at general merchandise stores fell -0.7 percent gain, while non-store retailers gained 2.7 percent.

More promisingly, so-called “control group” sales – with gasoline, cars, food services, and building materials excluded – climbed 0.7 percent, suggesting that consumers deployed spending into other categories as commodity prices fell and logistics difficulties began to ease.

Ten-year Treasury yields are sitting near 2.89 percent, and the dollar is holding ground as traders hold fire ahead of this afternoon’s Fed minutes.

Karl Schamotta, Chief Market Strategist