U.S. retail sales rises below expectations in August

U.S. retail sales rises below expectations in August. On a sequential basis, retail sales grew modestly by 0.1 percent, as compared with consensus expectations of 0.4 percent rise. This is the softest print since February. The disappointment was driven slightly by the positive revisions to July’s data, with monthly growth upgraded from the already strong 0.5 percent to 0.7 percent.

Sales at gasoline stations were up 1.65 percent, the largest monthly gain since May, but those at auto & parts dealers dropped 0.8 percent, a third straight monthly fall. Sales at building material stores stayed flat in August, little changed since May. After three strong months, sales at food services rose just 0.2 percent in the month, but are still up 10 percent year-on-year. Indeed, putting aside the 20 percent rise in the past year in gasoline station receipts, growth in food services is the second most rapid growing category.

Stripping gas, autos, building materials, and food services, the ‘control group’ rose just 0.1 percent sequentially, as compared with expectations of a rise of 0.4 percent. Looking into details, sales of clothing fell 1.7 percent, while sales of furniture dropped 0.3 percent and sales at food and beverage stores stayed flat.

Among the few categories where performance rebounded, sales at miscellaneous store retailers rose strongly by 2.3 percent, while sales at health and electronics stores rose 0.5 percent and 0.4 percent, respectively.

After many months of strong spending, consumer took a pause from shopping in August, possibly enjoying the final days of summer in the pool rather than in the shopping malls. This was not what forecasters were expecting, but after many months of quite strong figures some moderation was bound to materialize, especially in categories such as restaurants and eating out, which previously was a string of very solid figures.

Other categories, such as auto sales are feeling the pinch from rising interest rates and tighter lending standards, while sales of building materials are expected to be softer because of the recent deceleration in the housing market, noted TD Economics in a research report.

The August break might possibly prove short-lived. Given the incredibly hot labor market, signs of accelerating wage growth, and healthy household balance sheets, consumer spending is likely to stay strong in the coming months.

“That being said, the pace of spending is not likely to match that of the past several months. As the tax cut boost fades, and higher rates weigh on interest-sensitive purchases, sales growth is likely to slow to around 0.2 percent to 0.3 percent a month”, added TD Economics.

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