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WASHINGTON – Spending on vehicles boosted retail sales in August, suggesting that US buyers continue to support the economy in this time of global uncertainty.
Retail sales, which measure purchases in stores, restaurants and online, rose 0.4% in seasonally adjusted data in August from the previous month, the Commerce Department said Friday. The robust report exceeded economists' expectations and was closely followed by higher spending in July compared to initial estimates, up 0.8%. The data help to ensure that household spending remains an economic bulwark against signs of global slowdown, although they may not be enough to prevent some slowdown in US growth in the third quarter.
The increase in retail sales in August was driven by a 1.8% increase in vehicle spending, a sign that consumers were comfortable enough in their finances to make major purchases. They also spent more online, in building materials and sporting goods.
Nevertheless, apart from motor vehicles and their parts, retail sales remained stable in August and, excluding vehicles and gasoline, rose 0.1%. Last month, consumers spent less on food, restaurant meals, furniture and department stores.
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This weakness in basic retail sales led to a downward revision of growth forecasts for gross domestic product in the third quarter. The Federal Reserve's GDPNow model, as well as predictions from forecasting firm Macroeconomic Advisers, slipped to reach seasonally adjusted annual rates of 1.8% and 1.9%, respectively.
The US economy grew 2.0% in the second quarter and 3.1% in the first.
Friday's trade report does not track spending for most services, such as health care and housing, and the numbers are not adjusted for inflation. Retail sales account for about a quarter of all consumer spending.
Consumers are the main driver of the US economy and continue to benefit from low unemployment and rising wages in the eleventh year of current economic growth.
Retail spending provides vital support to other sectors of the economy with trade-related uncertainties.
"There is not much force outside of consumption," said
Paul Ashworth,
an economist from Capital Economics Ltd., noting the weakness of business investments, profits and exports. However, since consumer spending is such an important part of economic output, "a strong consumer can help you out of weakness in other areas," he added.
Matt Moore, director of sales at a car dealership in Nicholasville, Kentucky, recently purchased a used motorboat, a purchase that his family had spent since last year ruminating on.
"This year has been a really good year," said Moore, with the local economy being supported by jobs in the horseback and auto industries.
Car manufacturers
Honda engine
Co.
and
Toyota engine
Corp.
both announced strong US sales in August, which analysts attributed in part to lower short-term interest rates. August is a key month for auto dealers, who want to reduce their inventory of older models.
Retail sales data can be volatile from one month to the next, although the general trend shows that sales continue to rise. Compared to the previous year, retail sales rose 4.1% in August.
Retailer's Chief Financial Officer
Urban Outfitters
Inc.
Earlier this month, he said, "We have the impression that the consumer is always in the right place. we feel that the economy is always in its place. "
"Last year was obviously an incredibly strong year," said the CFO.
Frank J. Conforti
said at a retail conference on September 5. "There may have been some euphoria or behavior that motivated purchases versus tax benefits, but everything is still very strong."
While consumer spending remained strong in the third quarter, the outlook for the coming months depends on the state of trade and the labor market.
Here is the truth about the so-called "apocalypse of retail", it is more of a transformation. Lee Hawkins, editor-in-chief of WSJ News. Photo Illustration: Emily B. Hager / The Wall Street Journal
The unemployment rate was down 3.7% in August, although the pace of job growth has slowed, the Labor Department announced last week. This suggests that the global economic slowdown is not leading the US to recession, but has held back growth. Average hourly earnings increased 3.2% from August 2018, placing spending power in consumer portfolios.
As uncertainties and growing trade tensions weighed on the manufacturing sector and business investment, consumer confidence recovered slightly in early September. The preliminary index of consumer opinion from the University of Michigan reached 92.0, against 89.8 at the end of August.
According to economists, the lingering trade war and uncertainties over tariffs are a false stone for American businesses and consumers. Both the United States and China have shown goodwill in recent days.
On Wednesday, President Trump postponed a new round of tariff increases on imports from China, amounting to $ 250 billion, which would have come into effect Oct. 1. China then decided to exempt punitive purchases from the purchase of soybeans, pork and other US agricultural products.
-Likhitha Butchireddygari contributed to this article.
Write to Harriet Torry at [email protected]
Corrections & Amplifications
The Fed's GDPNow model for growth in the third quarter declined at a seasonally adjusted annual rate of 1.8% on September 13, compared with 1.9% on September 11th. An earlier version of this article incorrectly stated that it had decreased to 1.9%. (September 13)
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