Online shopping drives retail sales in the United States; the labor market is recovering

WASHINGTON, Sept. 16 (Reuters) – Retail sales in the United States rose unexpectedly in August, as an increase in online and furniture store purchases offsets the continued decline in car dealerships, which could temper expectations a marked slowdown in economic growth in the third quarter.

The surprise rebound in retail sales reported by the Commerce Department on Thursday came as economists lowered their gross domestic product estimates for the current quarter, citing the slump in motor vehicle sales, which is the result of a serious shortage of stocks.

Sales last month were likely boosted by back-to-school purchases and government child tax credit payments.

“Consumer spending will continue to guide economic recovery going forward,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania.

Retail sales rose 0.7% last month. Data for July has been revised down to show that retail sales fell 1.8% instead of 1.1% as previously reported. Economists polled by Reuters predicted retail sales would fall 0.8%. Sales are up 15.1% from a year ago and are well above their pre-pandemic level.

They are resisting even as spending shifts from goods to services like travel and entertainment, although the surge in COVID-19 infections is likely delaying the boom in spending on services. Retail sales are primarily goods, with services such as healthcare, education, travel, and hotel accommodation making up the remaining portion of consumer spending.

Online retail sales rebounded 5.3% after falling 4.6% in July. Most school districts started their 2021-2022 school year in August, with in-person learning resuming after last year’s switch to online classes due to the pandemic.

In mid-July, eligible households began receiving money under the Expanded Child Tax Credit program, which will run until December. Clothing store sales edged up 0.1% last month.

Sales at building supply stores increased 0.9% and receipts at furniture stores increased 3.7%.

But auto dealer sales fell 3.6% after falling 4.6% in July. A continuing global shortage of microchips, forcing automakers to cut production, is causing inventory shortages in showrooms.

The semiconductor crisis, which has been made worse by the latest wave of infections caused by the Delta variant of the coronavirus, mainly in Southeast Asia, is also causing shortages of some electronics. Congestion at ports in China is also adding to supply bottlenecks.

But receipts at sporting goods, hobby, musical instrument and book stores fell 2.7%. Sales at electronics and appliance stores fell 3.1%, likely due to shortages.

Sales at restaurants and bars likely haven’t changed, as the surge in coronavirus cases has kept people at home. Restaurants and bars are the only category of services in the retail sales report.

Excluding autos, gasoline, building materials and food services, retail sales rebounded 2.5% last month after declining 1.9% in July.

These so-called basic retail sales correspond most closely to the consumer expenditure component of GDP. They were previously estimated to have fallen 1.0% in July.

US stocks were trading slightly lower. The dollar (.DXY) appreciated against a basket of currencies. US Treasury prices have fallen.

REDUCED GROWTH ESTIMATES

Slowing motor vehicle sales and difficulties for businesses to rebuild their inventories prompted economists to lower their GDP growth estimates for the third quarter.

JPMorgan economists on Wednesday again cut their GDP growth forecast for the third quarter to an annualized rate of 5.0%, from 7.0%. Goldman Sachs earlier this month lowered its estimate to 3.5% from 5.25%.

The slowdown was corroborated by the Federal Reserve’s “Beige Book” report last week, showing that “economic growth slowed slightly to a moderate pace from early July to August”. The economy grew at a rate of 6.6% in the second quarter.

“We expect domestic demand to increase in the next quarter,” said Michael Feroli, chief US economist at JPMorgan in New York. “This assumes that the headwinds from Delta are fading and that the problems plaguing the auto industry are gradually easing.”

Americans are sitting on at least $ 2 trillion in excess savings accumulated during the pandemic. Wages are rising as companies scramble to fill a record 10.9 million vacancies.

A separate Labor Department report on Thursday showed initial claims for state unemployment benefits rose from 20,000 to 332,000 seasonally adjusted for the week ended September 11. Economists had forecast 330,000 claims for the last week.

The claims were likely amplified by Hurricane Ida, which devastated U.S. offshore power generation and cut off power in Louisiana. Ida, one of the strongest hurricanes to ever hit the US Gulf of Mexico coast, also inundated the Mississippi and caused historic flooding in New York and New Jersey.

Claims fell from a record 6.149 million in early April 2020. A range of 200,000 to 250,000 is considered consistent with healthy labor market conditions.

Reporting by Lucia Mutikani Editing by Chizu Nomiyama and Paul Simao

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