August Retail Sales - Another Broad Advance; July Revised Higher

In nominal terms, U.S. retail sales advanced 5.0% year-over-year and 0.6% month-over-month, beating expectations.  Adjusting for inflation, spending advanced 2.1% year-over-year and 0.2% month-over-month.  Nominal growth in July was favorably revised from +0.5% to +0.6%.  Following somewhat dampened sentiment in the first half of the year, which was plagued by tariff uncertainty, consumer spending has ramped back up in recent months.  While the labor market appears to be shifting into a lower gear, additional clarity on trade policy and a rebound in the stock market support greater confidence in consumers’ spending power.  Fed officials have continued to assess the trajectory of monetary policy opting to keep rates steady up to this point, however there is growing evidence of impending cuts.  Investors are pricing in two to three quarter point cuts in 2025 and have ratcheted up odds on a September cut to over 95%.  The next FOMC meeting is scheduled for tomorrow.

• Real (inflation adjusted) retail sales advanced 2.1% year-over-year.  In August, retail sales grew 5.0% nominally netting real growth of 2.1% after adjusting for 2.9% inflation.  Higher spending at brick-and-mortar retailers (+10.7%), online retailers (+10.1%), restaurant dining (+6.5%) and motor vehicles (+5.6%) was partially offset by a decline at the pump (-0.7%).  Ten of thirteen categories advanced in real terms.

• Real (inflation adjusted) retail sales advanced 0.2% month-over-month.  In August, nominal retail sales levels grew 0.6% compared to July netting real growth of 0.2% after adjusting for 0.4% inflation in the month.  Higher spending online (+2.0%) and at restaurants (+0.7%) was partially offset by declines at brick-and-mortar retailers (-1.1%).  Six of thirteen categories advanced in real terms.