Nicholas A. Juhle, CFA®

Chief Investment Officer

August Retail Sales – Better Than Expected

U.S. consumers showed resilience in August as real retail sales grew 0.8% year-over-year and 0.2% month-over-month.  In nominal terms, retail spending increased 9.1% for the year and 0.3% compared to July.  Economists were anticipating a month-over-month decline of 0.1%.  The value of sales at gas stations dropped again on lower fuel prices, likely freeing up cash to spend elsewhere.  Excluding gas stations, retail sales rose 0.8% month-over-month.  The Fed continues to navigate a tenuous path as it seeks to cool the economy enough to tame inflation, but not so much as to cause a recession or a surge in unemployment.  Today’s report suggests consumer spending, one of many data points considered by the Fed, remains solid enough for the central bank to continue its path of aggressive rate hikes.  At this point, the Fed is widely expected to implement another 0.75% rate increase in conjunction with next week’s FOMC meeting.

  • Real (inflation adjusted) retail sales increased 0.8% year-over-year.  In August, retail sales grew 9.1% compared to a year ago netting 0.8% real growth after adjusting for 8.3% inflation.  Higher spending on gasoline compared to a year ago (+29% YoY) accounted for a large portion of the nominal increase, but strength was also evident in brick and mortar retail (+15%), online retail (+11), food services and drinking places (+11%), and building materials (+11%) all of which outpaced inflation.  Historically, real year-over-year declines in retail spending have been one of many leading indicators of a recession although this indicator alone has proven more volatile and has produced several false positives over the years.  Today’s report suggests consumer spending is far from collapsing in spite of elevated inflation levels.
  • Real (inflation adjusted ) retail sales rose 0.2% month-over-month.  In August, retail sales grew 0.3% compared to July (consensus -0.1%) netting 0.2% real growth after adjusting for 0.1% inflation.  Sales at gasoline stations fell 4.2% offsetting better results in other categories.  Excluding gas stations, retail sales increased by 0.8% compared to July with key contributors including motor vehicles (+3.0%) brick and mortar retail (+1.6%), building materials (+1.1%), and food service and drinking places (+1.1%).  All told, eight of thirteen categories showed increases.