Retail Sales
Total retail sales rose 0.5% in July, after rising by an upwardly revised 0.3% in June (originally reported as a 0.1% gain). Gains were widespread across most categories, including miscellaneous store retailers (2.4%), gasoline stations (1.6%), and electronics and appliances (1.4%). Declines were limited to three categories, sporting goods, hobby, etc. (-1.5%), followed by building materials (-0.4%) and food service and drinking places (-0.1%). Sales are 8.5% above their year-ago level. Core sales, net of building materials, gas stations, and motor vehicle sales, were up 0.3% in July. The trend in core retail sales is consistent with slightly stronger personal consumption expenditures in the second half of the year.

International Trade Balance
The U.S. trade deficit in goods and services widened to $53.1 billion from $49.2 billion in May. Exports fell 2.3% to $170.9 billion and imports declined 0.8% to $223.9 billion. Some of the slowdown in imports was due to a reduction in the quantity and prices of imported oil. The trade deficit in goods widened to $67.6 billion and the trade surplus in services slipped $0.1 billion to $14.5 billion in June. Despite weakness in the global economy, we expect exports to rebound in the next few months and for imports to gradually rise as well.

Federal Open Market Committee Monetary Policy
The FOMC kept the federal funds rate at a range between 0% and 0.25% at its latest meeting in light of weaker than expected growth. The Fed updated its language in its current statement and replaced its earlier pledge to keep the federal funds rate at its current level for an “extended period” with a pledge to keep the federal funds rate at its current level through mid-2013. The Fed cited the soft labor market, the depressed housing market, and low rates of resource utilization, in its decision to keep rates at their current levels.  Looking ahead, the Fed does not plan another round of quantitative easing but remains open to employing a range of policy tools if the economy deteriorates further.