Advance estimates of retail and food services sales in August totaled $526.1 billion, according to a new report from the U.S. Census Bureau. That was a 0.4 percent increase from July’s upward-revised print and “core” retail sales, which exclude the volatile automobiles and energy components, also rose (0.1 percent). Under the hood, though, things were somewhat mixed as seven of the thirteen major retail categories fell in August, including marked declines at restaurants, food and beverage sellers, general-merchandise stores, and clothing vendors. Some of the weakness may be tariff-related and some may simply be a bit of a giveback following the broader spike in spending that resulted from many retailers’ end-of-summer promotions, including the big Amazon Prime Day event.
More importantly, “control group” retail sales, which better track consumer demand trends by stripping out sales at food services establishments, car dealers, building-materials stores, and gasoline stations, by some measures are still growing at the fastest rate we have seen since the early ‘90s. With a strong labor market and wage growth accelerating, the only thing with the potential to meaningfully derail Americans’ spending any time soon is sentiment. Fortunately, a key consumer confidence gauge from the University of Michigan released this morning showed that optimism rebounded in September. Although still well below the cycle highs, sentiment continues to quickly stabilize every time trade war tensions abate and the stock market approaches record levels. The report’s authors added that “While a recession is not anticipated in the year ahead, neither is a resurgence in personal consumption. The outlook for consumption is for a slower but positive growth, keeping the expansion going for another year.”
Sources: Econoday, U.S. BEA, UoM, FRBSL