The Economy

Autos Help Retail Sales Climb 0.4% in August

“The trend in consumer spending growth still looks very solid. Consumers remain the locomotive of the economy."
Matthew HellerSeptember 13, 2019

U.S. retail sales rose more than expected in August, suggesting consumer spending continues to be robust despite trade uncertainty and other headwinds.

The Commerce Department reported Friday that retail sales increased 0.4% last month from July, driven by a 1.8% jump in spending on vehicles. Economists polled by Reuters had forecast retail sales would gain 0.2% in August.

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Excluding motor vehicles and parts, retail sales were flat in August but they have increased for six straight months, the longest such stretch since June 2017. Compared to August last year, they advanced 4.1%.

“The trend in consumer spending growth still looks very solid,” Michael Feroli, an economist at JPMorgan in New York, told Reuters. “Consumers remain the locomotive of the economy.”

The Wall Street Journal said the August sales report provides “reassurance that household spending remains an economic bulwark against signs of a global slowdown, though perhaps not enough to prevent some softening in U.S. growth in the third quarter.”

The Federal Reserve Bank of Atlanta and forecasting firm Macroeconomic Advisers are predicting GDP will grow 1.8% and 1.9%, respectively, in the current quarter. It expanded at a 2% rate in the second quarter and 3.1% in the first.

With the Trump administration escalating its tariff war with China, economists are concerned retail sales could pull back as businesses pass on the duties to consumers, resulting in higher prices for the targeted goods.

“It is too early to assess the impact of the new tariffs that took effect at the beginning of this month, but they do present downside risks to household spending,” said Jack Kleinhenz, chief economist for the National Retail Federation in Washington.

The University of Michigan’s latest survey of consumers found that concerns about the impact of tariffs on the economy rose in early September.

In August, sales at building material and gardening equipment stores rose 1.4%, the most since January, while online and mail-order retail sales increased 1.6% after shooting up 1.7% in July. But receipts at clothing stores fell 0.9% last month and furniture sales dropped 0.5%, the largest decrease in eight months.

Photo by Justin Sullivan/Getty Images