Retail sales come in higher

September 17, 2024

Retail sales surprised to the upside, growing 0.1% in August after an upwardly revised July. That topped consensus forecasts of -0.2%.

Spending at auto dealers edged lower but beat expectations. Unit sales plummeted during the month. The drop in retail vehicle sales was not nearly as dramatic as the unit sales implied, which suggests that more of the weakness in vehicle sales during the month was in business investment. That includes rental car companies.

E-commerce stores reported the strongest gains with a rise of 1.4%. Online shopping has been averaging double-digit growth since 2017 and continued to gain momentum relative to in-store sales. Online discounting has picked up. Miscellaneous retailers, who include everyone from florists to stationers, bounced back after sputtering in July.

Building materials dealers showed positive momentum as homeowners leveraged home equity lines of credit for home improvement projects. Since the start of Spring, four of five months have been in the black for the category. Both sporting goods shops and personal care stores expanded. Older, wealthier households are making improvements in homes where equity has exploded. Many are making renovations to age in place, something millennials who are looking for a home would prefer they did not do.

Discounting by big-box retailers and the pivot to discounters continued. Gains at big box discounters only partially offset a sharp drop in sales at more traditional department stores. Clothing and accessory stores fell farther.

Sales at restaurants and bars declined for the first time in five months, while food and beverage stores fell for the second time in seven months. That suggests some moderation in discretionary spending. The drop was larger after adjusting for inflation, notably at restaurants.

Furniture stores and electronics and appliance stores contracted in July. Low sales and high rates have taken a toll on housing-related sale.

Gas station sales fell after adjusting for the deflation of gasoline prices during August. The ranks of those out on vacation in the household survey for August fell to the lowest level since 2020. The data are seasonally adjusted to include the return to school that occurs in August for many school districts.

Core retail sales, which are a direct input to GDP, rose 0.3%, a touch lower than last month but still in the black. That supports our forecast that consumer spending accelerated in the third quarter and drove economic gains for the period.