August retail sales show buoyant US consumer

Retail sales grew 0.2% m/m in August, in line with forecast (0.2%) and a touch below consensus expectations (0.3%), as broad-based strength in core sales was buffeted by declines in gasoline stations, building materials, furniture and department store sales. These declines were largely anticipated, however, and stronger-than-expected core retail sales in August, along with upward revisions to June and July, suggest a healthy pace of private consumption growth through Q3.

Sales at motor vehicle and parts dealers rose 0.7% m/m in August (previous: 1.3%), broadly in line with the 17.7mn in light weight vehicle sales reported by manufacturers. Gasoline stations sales fell 1.8% (previous: +1.9%), as lower retail prices dragged down nominal sales estimates. Health and personal care (0.8% m/m, previous: 0.6%), clothing (0.4% m/m, previous: 0.6%), sporting goods (0.3% m/m, previous: 1.3%), non-store retailers (0.2% m/m, previous: 1.7%) and eating and drinking establishments (0.7% m/m, previous: 0.3%) all reported solid sales growth in August that we see as consistent with a healthy US consumer.

This strength resulted in 0.4% m/m growth in the retail sales control group, one-tenth above our forecast for our preferred measure of core retail sales. Core sales were also revised up in June (0.3% m/m, initial: 0.2%) and July (0.6% m/m, initial: 0.3%). The revised profile shows a 3-month annualized growth rate of 5.7%, consistent with robust consumer spending. Solid household income gains have led to four consecutive months of solid growth in core sales, and we expect the consumer to remain the dominant force behind US economic growth.

"Stronger-than-expected core retail sales in August, along with upward revisions to prior months' data, bring our tracking estimate of Q3 private consumption growth to 3.1%, up from 2.8%. This boosted our Q3 GDP tracking estimate two-tenths, to 2.4%", says Barclays.