Retail sales were up 0.3% month-on-month (m/m) in August – above the consensus forecast (-0.1% m/m) – and higher than the flat reading in July.
Sales at autos & parts dealers were the major contributor to today’s gains, with a 2.8% m/m rebound from July’s 2.0% m/m decline.
Excluding autos, retail sales were down 0.3% m/m in August, below the consensus expectations for a flat reading.
Sales at gasoline stations were down by 4.2% m/m, reflecting the 10.6% pullback in gas prices. Adjusted for prices, sales were up 7.1% m/m. Meanwhile, sales at building materials retailers were up 1.1% m/m in August, but excluding prices they declined by 0.3% m/m as reflecting cooling housing activity.
Excluding the above categories, the “control group”, used in calculating personal consumption expenditures, was flat on the month in August – lower than the 0.5% m/m expected by the consensus. July’s reading was also revised down to 0.4% m/m, from 0.8% m/m reported previously.
- Nominal growth was reported by miscellaneous stores retailers (+1.6% m/m), food services & drinking places (+1.1% m/m), department stores, food & beverage stores (+0.5% m/m), sporting goods (+0.5% m/m), hobby, book & music stores (+0.5% m/m) and clothing & accessory stores (+0.4% m/m).
- The one category that weighed on growth in August was non-store retailers (-0.7% m/m), which stepped down from a stellar growth in July, outweighing all the other gains.
Key Implications
Strong demand for cars drove today’s stronger-than-expected reading. Putting autos aside, retail sales declined. When adjusted for inflation, sales ex autos were down 1.2% month-on-month. Some of the weakness was offset by stronger real sales at apparel stores as consumers opened their wallets to prep their kids for school. Still, it seems more and more obvious that consumers are pivoting to prioritizing essentials, with our estimate of real discretionary spending contracting an average of -0.1% m/m over the past three months.
Today’s stronger than expected reading only reinforces the Fed’s hawkish stance. Today’s data excludes almost all services consumption (except spending on restaurants) which should be relatively more resilient than spending on non-essential goods. We now expect real goods spending to come in at a healthy 0.3% month-on-month, tracking 1.4% quarter-on-quarter (annualized).
