U.S. Retail Sales Post Surprise Gain
The value of retail purchases, unadjusted for inflation, increased 0.1% after a revised 1.1% gain in July, largely thanks to online retailers.
U.S. retail sales unexpectedly rose in August, supported by online purchases that masked more mixed results at other merchants.
The value of retail purchases, unadjusted for inflation, increased 0.1 percent after a revised 1.1 percent gain in July, Commerce Department data showed Tuesday. Excluding autos and gas stations, overall sales advanced for the fourth consecutive month.
Five of the report’s 13 categories posted increases, while others—such as electronics and appliances, clothing, and furniture—fell. E-commerce merchants posted a solid 1.4 percent gain. Receipts at gas stations decreased, reflecting cheaper prices at the pump.
The retail sales report showed so-called control-group sales—which are used to calculate gross domestic product (GDP)—rose 0.3 percent in August. The measure excludes food services, auto dealers, building-materials stores, and gas stations.
Control-group sales rose at a robust 5.7 percent annualized pace in latest three months, the fastest rate since August 2023.
| Metric | Actual | Estimate |
|---|---|---|
| Retail sales (month-over-month) | +0.1% | -0.2% |
| Sales excluding autos & gas (month-over-month) | +0.2% | +0.3% |
| ‘Control group’ sales (month-over-month) | +0.3% | +0.3% |
The figures indicate resilient household demand midway through the third quarter, even as hiring and wage growth show signs of moderating. Even so, the report did little to settle the debate among economists about whether the Federal Reserve will go for a smaller interest rate cut of 25 basis points (bps) or a larger one tomorrow.
“At the margin, I’d argue that the August report was a bit weaker than on the surface and is supportive of a faster pace of rate cuts,” Omair Sharif, president of Inflation Insights LLC, said in a note.
Others, like Mark Streiber at FHN Financial, weren’t so sure, noting that some categories fell because of price declines, not lower volume. “Markets were quick to dismiss the report in hopes the FOMC has already made up its mind about a 50bp cut tomorrow,” Streiber said in a note, referring to the Federal Open Market Committee that sets policy. “We agree that one retail sales report would be unlikely to move FOMC members, but we are still on the side of a 25bp cut tomorrow.”
What Bloomberg Economists Say…
“The details suggest consumers have grown more frugal, going online to search for deals and discounts on essentials and back-to-school items. With the savings rate falling to 2.9 percent in July amid a cooling labor market, consumers have little choice but to tighten their budgets—posing the risk of a broader slowdown and arguing for the larger FOMC cut this week.”
— Eliza Winger.
In addition to cooler job growth, economists forecast the combination of elevated borrowing costs, the depletion of pandemic savings, and a higher cost of living will eventually prompt American consumers to cut back.
The S&P 500 opened higher, the dollar remained stronger, and Treasury yields ticked up after the report. Separate data Tuesday showed U.S. industrial production rebounded in August from a Hurricane Beryl–related slide a month earlier.
Not only are the retail figures unadjusted for price changes, they also largely reflect purchases of goods, which comprise a relatively narrow share of overall consumer outlays. Data later this month will provide more details on August inflation-adjusted spending on goods and services.
Spending at restaurants and bars, the only service-sector category in the retail report, were little changed last month.
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