U.S. retail sales rebound sharply in August

A shopper holds a child as they look at items on sale for Halloween in a Costco warehouse in Sheridan, Colo., this week.David Zalubowski/The Associated Press

U.S. retail sales rebounded more than expected in August as households stepped up purchases of motor vehicles and stocked up for the new school year, reinforcing the economy’s resilience even as consumers grow more anxious about high inflation.

Retail sales jumped 1.2 per cent last month after a revised 0.5-per-cent drop in July, which was the first decline in nine months, the Commerce Department’s Census Bureau said on Wednesday. Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, rebounding 0.8 per cent after a previously reported 0.6-per-cent drop in July. Estimates ranged from as low as a 0.2-per-cent gain to as high as a 1.1-per-cent increase.

Last month’s increase also partially reflected higher gasoline prices, which lifted receipts at service stations.

Households have continued to spend despite stubbornly high inflation because of the oil price shock and supply chain strains from the U.S.-led war with Iran. Consumers have, however, become more selective and are seeking lower-priced goods. Consumer sentiment deteriorated this month.

Spending is being supported by steady wage growth and recent stock market gains. Households are also saving less and tapping into their nest eggs. The strength in retail sales, together with elevated price pressures and a labor market that is regaining its poise after wobbling through much of summer, further strengthens financial market expectations that the Federal Reserve will raise interest rates later on Wednesday.

Retail sales excluding automobiles, gasoline, building materials and food services surged 1.4 per cent last month after an unrevised 0.4-per-cent decline in July. Economists had forecast these so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, rising 0.4 per cent.

Economic growth estimates for the third quarter currently exceed a 2.0-per-cent annualized rate. The economy grew at a 1.5-per-cent pace last quarter.