Back to school shopping and child tax credit payments pushed U.S. retail sales up in August.
The U.S. Commerce department reported the uptick of 0.7% in retail sales. The organization attributed the increase to a surge in online sales, which offset a decline in sales at auto dealerships. Auto sales tumbled 3.6% after declining 4.6% in July, while online retail sales grew 5.3% after dropping 4.6% in July.
Clothing sales increased 0.1% last month. Building material and furniture stores also saw gains.
“U.S. consumption is not slowing as quickly as it appeared a month ago despite the fading stimulus, and the Delta variant did not much affect the industries feeding into retail sales,” said Chris Low, chief economist at FHN Financial in New York. “The economy continued to hum in August.”
Still, the slump in automotive sales has economists downgrading their gross domestic profit estimates for the third quarter. The slump is sales, though, is not from declining consumer confidence but an acute inventory shortage and rising COVID-19 infections.
August may be up but data but the Commerce Department revised data for July downward to show retail sales declining 1.8% instead of 1.1% as previously reported.
Total sales are up 15.1% from a year ago and are 17.7% above their pre-pandemic level.
Consumer spending is also changing. Consumers shifting expendable income back to services like travel and entertainment. Retail sales represent mostly goods. But services such as healthcare, education, travel and lodging represent the rest of consumer spending.
School districts started the 2021-2022 academic year in August and early September, with most resuming in-person learning. At the same time, qualifying households started receiving money under the expanded child tax credit program, which continues until December.
Not every industry saw improvements. Electronics and appliance sales fell 3.1%. Sporting goods, hobby, musical instrument and bookstore sales also fell.
Business at restaurants and bars remained flat amid Delta variant fears. Restaurants and bars are the only services category in the retail sales report.
When sales of automobiles, gasoline, building materials and food services are excluded, retail sales rebounded 2.5% last month.
Americans’ savings are higher than ever due to $2.5 trillion in excess savings accumulated during the pandemic. Wages are skyrocketing as companies pay more to fill a record 10.9 million job openings.
The Labor Department reported initial claims for state jobless benefits rose 20,000 to a seasonally adjusted 332,000 for the week ended Sept. 11.
The number of people who continue to receive benefits fell 187,000 to 2.665 million in the week ended Sept. 4, the lowest since mid-March 2020. Experts predict the expiration of federal government-funded benefits also will boost the labor pool.
The Philadelphia Federal Reserve showed its business activity index rose to 30.7 in September from 19.4 in August. An index rating higher than zero indicates growth in manufacturing in eastern Pennsylvania, southern New Jersey and Delaware.
Manufacturers reported a moderation in input prices, which fits with recent data that shows inflation has probably peaked. Companies also increased hours for workers as they struggled to fill jobs.
Economists have slashed their GDP growth estimates, citing tanking motor vehicle sales and inventory struggles.
JPMorgan had trimmed its third-quarter GDP growth forecast to a 5.0% annualized rate to 7.0%. The Federal Reserve’s “Beige Book” reports “economic growth downshifted slightly to a moderate pace in early July through August.”
But after retail sales report came out, Morgan Stanley economists raised their third-quarter GDP growth estimate to a 5.0% rate from a 3.3% pace. And Goldman Sachs raised its forecast to a 4.5% pace from a 3.5% rate, having lowered it to a 5.25% pace earlier in September.