(Bloomberg) -- US retail sales unexpectedly rose in August, supported by online purchases that masked more mixed results at other merchants.
The value of retail purchases, unadjusted for inflation, increased 0.1% after a revised 1.1% gain in July, Commerce Department data showed Tuesday. Excluding autos and gasoline stations, sales advanced for fourth month.
Five of the report’s 13 categories posted increases, while others such as electronics and appliances, clothing and furniture fell. E-commerce merchants posted a solid 1.4% gain. Receipts at gasoline service stations decreased, reflecting cheaper prices at the pump.
The retail sales report showed so-called control-group sales — which are used to calculate gross domestic product — rose 0.3% in August. The measure excludes food services, auto dealers, building materials stores and gasoline stations.
Control-group sales rose at a robust 5.7% annualized pace in latest three months, the fastest rate since August 2023.
The figures indicate resilient household demand midway through the third quarter even as hiring and wage growth show signs of moderating. Even so, the report did little to settle the debate among economists as whether the Federal Reserve will go for a smaller interest-rate cut of 25 basis points or a larger one on Wednesday.
“At the margin I’d argue that the August report was a bit weaker than on the surface and is supportive of a faster pace of rate cuts,” Omair Sharif, president of Inflation Insights LLC, said in a note.
Others like Mark Streiber at FHN Financial weren’t so sure, noting that some categories fell because of price declines, not lower volume.
“Markets were quick to dismiss the report in hopes the FOMC has already made up its mind about a 50bp cut tomorrow,” Streiber said in a note, referring to the Federal Open Market Committee that sets policy. “We agree that one retail sales report would be unlikely to move FOMC members, but we are still on the side of a 25bp cut tomorrow.”
What Bloomberg Economics Says...
“The details suggest consumers have grown more frugal, going online to search for deals and discounts on essentials and back-to-school items. With the savings rate falling to 2.9% in July amid a cooling labor market, consumers have little choice but to tighten their budgets — posing the risk of a broader slowdown and arguing for the larger FOMC cut this week.”
— Eliza Winger. For the full note, click here
In addition to cooler job growth, economists forecast the combination of elevated borrowing costs, the depletion of pandemic savings and a higher cost of living will eventually prompt American consumers to cut back.
The S&P 500 opened higher, the dollar remained stronger and Treasury yields ticked up after the report. Separate data Tuesday showed US industrial production rebounded in August from a Hurricane Beryl-related slide a month earlier.
Not only are the retail figures unadjusted for price changes, they also largely reflect purchases of goods, which comprise a relatively narrow share of overall consumer outlays. Data later this month will provide more details on August inflation-adjusted spending on goods and services.
Spending at restaurants and bars, the only service-sector category in the retail report, were little changed last month.
--With assistance from Chris Middleton and Cécile Daurat.
(Adds economists’ comments, industrial production)
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