US retail sales rebounded strongly in August, increasing by 1.2% month-over-month, significantly surpassing the Bloomberg survey's median estimate of a 0.8% advance and reversing a revised 0.5% decline in July. This marks the biggest increase in five months, indicating continued consumer spending despite rising gasoline prices. Excluding motor vehicles and parts, core retail sales rose by 1.4%, also beating the consensus forecast of 0.5%. Even after excluding both gas and autos, sales still saw a robust 1.2% increase, according to the US Census Bureau data.
The surge was broad-based, with internet retailers and restaurants showing particular strength. Internet sales jumped 2.6% in August, recovering from a previous slump, while sales at bars and restaurants increased a surprising 1.2%. Other notable gains included a 3.1% rise at gasoline stations (largely due to higher prices), 1.9% at miscellaneous store retailers, and 1.6% at electronics and appliance stores. This robust performance suggests the US economy maintained momentum towards the end of summer, with the Atlanta Federal Reserve's GDPNow tool projecting a 4.4% growth rate for the third quarter.
Analysts noted that the strong retail sales data, which are not adjusted for inflation, reflect a resilient consumer. David Russell, global head of market strategy at Tradestation, commented that the sales figures dispel worries about an economic slowdown. However, some, like Amanda Lai of Schwab Network, suggest a growing divide between higher- and lower-income consumers, with wealthier individuals benefiting from rising stock prices while lower-income families face more strain. The strong spending, even amidst higher prices and a significant energy shock, makes the case for the Federal Reserve to continue hiking interest rates, as it suggests inflationary pressures can be passed on by firms and current demand is not cooling.
