Consumer spending, a key driver of economic growth, received a much-needed boost as retail sales in July surpassed expectations, according to a government report released on Thursday. The stronger-than-expected sales figures have allayed fears of a looming recession and painted an optimistic picture of consumer spending, easing concerns about the overall strength of the economy.

The positive retail sales report had a significant impact on the stock market, driving stocks higher. The S&P 500 experienced a substantial jump of 1.6 percent, marking its sixth consecutive daily gain, while the tech-heavy Nasdaq saw an even more pronounced rise.

The Commerce Department reported a 1 percent increase in retail sales for July compared to the previous month, exceeding economists' expectations of a 0.4 percent rise. Analysts attribute this surge to a rebound in auto sales, as disruptions caused by cyberattacks faded away. Sales excluding autos and gasoline, a more indicative measure of spending trends, also surpassed expectations with a 0.4 percent increase.

Consumer spending holds significant weight in the U.S. economy, accounting for approximately two-thirds of the gross domestic product (GDP). The resilience demonstrated by consumer spending in the retail sales report comes as reassuring news amid concerns sparked by weaker-than-expected employment figures, which had triggered a market sell-off earlier this month.

Based on the solid retail sales data, economists now project that consumer spending is on track to grow by 3.5 percent during the third quarter, according to Kathy Bostjancic, the chief economist of Nationwide. If realized, this growth would propel the overall economic growth rate to a healthy rate surpassing 2 percent for the quarter, providing a much-needed boost to the economy.

The seemingly constant warnings of an impending economic downturn since the Federal Reserve began raising interest rates two years ago appear to be refuted by the U.S. economy. Despite concerns, robust consumer spending has been instrumental in facilitating a rapid and forceful recovery from the shock of the coronavirus pandemic.

The retail sales numbers showcased in the recent report contribute to a series of positive data points this week that have alleviated economic worries. Walmart, the largest retailer in the United States, reported a rise in sales for the latest quarter that surpassed analysts' estimates. The company also revised its sales and profit forecast for the year, leading to a surge of over 6 percent in its shares on Thursday.

Furthermore, the job market showcased resilience as unemployment claims for the previous week decreased compared to the previous week's figures, providing yet another reassuring data point on Thursday.

Inflation, as reported by the Bureau of Labor Statistics, stood at 2.9 percent in July on a yearly basis, marking the first time it has dropped below 3 percent since 2021. The cooling inflation rate has solidified investor predictions that the Federal Reserve will embark on a course of lowering interest rates next month.

Market experts suggest that the strong retail sales report coupled with other positive economic indicators have created an extremely positive environment for the stock market. Chris Zaccarelli, Chief Investment Officer at Independent Advisor Alliance, highlights that the combination of these factors instills confidence and bolsters the overall economic sentiment.

As the U.S. economy continues to defy expectations, the current rise in consumer spending provides reassurance and optimism for a sustained period of economic growth.