Another month of falling gas prices brought little relief to Americans’ wallets in August. It drove consumers back to stores last month.
The Census Bureau reported Thursday that a key measure of August US retail sales unexpectedly rose 0.3% on a monthly basis, after a revised decrease of 0.4% in July. Retail sales, which have not been adjusted for inflation, were up 9.1% from a year ago.
The continued decline in gas prices was reflected by a 4.2% drop for the month on spending at gas stations, Support for this volatile component, sales for the month increased by 0.8%. Persistently high food inflation a . appeared in Grocery store spending increased by 0.2% on a month-on-month basis.
Strong readings, a sign of a resilient consumer, are likely to give the Federal Reserve more ammunition, which is raising interest rates to beat inflation to the highest in 40 years. The Bureau of Labor Statistics reported Tuesday that consumer prices in August rose 8.3% from the previous year.
Eight of the 13 categories of retail spending tracked by the Census Bureau rose in August. Spending at food and beverage retailers grew 0.5% for the month and was up 7.2% over the previous year. Sales at restaurants and bars increased, and car dealerships grew 2.8% on the month. Expenditure on building materials and equipment, clothing and sporting goods also increased.
“Clothes and department stores” may be able to keep a lot of school shoppers spending in the store, said Doug Hermanson, Kantar’s chief economist. “Gasoline prices have plummeted over the past few months … from a parent’s perspective, it freed up a little bit of cash they didn’t think they were going to have in May or June.”
August spending fell at gas stations as well as furniture retailers, electronics stores, health and personal care stores, and non-store retailers. Non-store sales, a rough proxy for e-commerce, are likely to fall in August due to the timing of Amazon Prime Day in July, market observers suggested.
“Consumers are pulling back electronics and furniture. Those are the channels that are showing the weight of the housing market … continue to hit those areas,” said Hermanson. Freddie Mac data found mortgage rates for the week ended Thursday increased by more than 6% in the U.S., the highest level since the 2008 fall and more than double the rate a year earlier.
Retail reports suggest that the tailwind of lower gas prices was a major factor helping Americans cope last month. This raises the worrying possibility that a winter spike in gas or household heating costs could trigger a significant layoff, as consumers have less dry powder today than they did a year ago, when lockdowns and government support to household balance sheets was better strengthened with savings from.
“I think consumers are reacting to a few things. One, they have taken out a lot of their savings and are also reacting to higher prices for a lot of goods,” said Luke Tilly, chief economist at the Wilmington Trust.
The pain in the pump exacerbates it, he said. “gas prices Definitely a challenge for consumers. They act like a lot of tax. If we see another jump in gas prices, we would expect to see a lot of weak spending in these other retailing categories.
At its meeting next week, the central bank is widely expected to raise its benchmark interest rate by 75 basis points (or three-quarters of a percentage point) for the third time in a row.
“The Fed has gone out of its way to emphasize that they’re going to be data-driven … rather than trying to forecast,” said Ross Mayfield, investment strategy analyst at Baird.
Fed officials, however, will also have to take into account crosscurrents such as a surprisingly downward revision in July retail sales data, which was recalculated to reflect a 0.4% drop from an initially flat reading. Analysts said this suggests that consumers are starting to show some fatigue.
“Consumers are still spending. In many cases, however, they are taking home less,” Stifel chief economist Lindsay Piegza said in a research note. “With inflation continuing to rise, buyers are struggling to reduce purchasing power with higher prices,” he said, adding that the change in spending patterns indicates that consumers are concerned about their financial security. Starting to worry.
Ted Rossman, senior industry analyst at Bankrate, said there is evidence the wealthy are holding up household balance sheets while lower-income households struggle to buy necessities, but that economic stress is narrowing the income spectrum. .
“I think we are starting to see that move,” he said. [It’s] We see it in things like credit card balances, which he said are reaching record highs. “All of this has a cumulative effect.”