U.S retail sales see modest rise in August after strong July

U.S. retail sales barely rose in August as consumers slowed their spending after a robust month of shopping in July.

The Commerce Department said Friday that the value of purchases ticked up just 0.1% last month, the smallest increase in six months. But the sluggish figure may prove only a temporary blip. It partly reflected falling prices for items like clothing, and it followed a strong gain of 0.7% in July.

Consumer confidence soared to its highest level in 18 years in August as Americans expressed a more optimistic outlook on the economy. That suggests that retail sales could rebound in the coming months.

“The trend in retail spending is still solid, fueled by job growth and rising wages,” said Ben Ayers, senior economist at Nationwide. “We expect retail sales to pick up again in coming months to continue a strong 2018 for consumer activity.”

Still, auto sales fell 0.8 % last month, and clothing stores sales plunged 1.7%, the steepest drop in 18 months, though that figure mostly reflected lower-priced clothing rather than declining demand.

Retail sales are closely monitored by economists because they provide an early read on consumer spending, which drives about two-thirds of economic activity.

Sales at gas stations jumped 1.7%, an increase that reflected higher prices at the pump. Excluding gas stations, retail sales slipped 0.1%, the first decline since January.

Sales increased at electronics and appliance stores, sporting goods stores, restaurants and bars, and a category that includes online and catalogue retailers. Online and catalogue sales have jumped 10.4% compared with a year earlier, a much larger increase than the 6.6% rise in overall sales.

There are other signs that consumers are optimistic and prepared to spend. Americans borrowed more in July, increasing credit card debt and student and auto loans —a sign of confidence in their ability to repay the debt.

Retailers expect a solid winter holiday shopping season and are announcing plans to ramp up their hiring of seasonal staff. Target said this week that it plans to hire 120,000 temporary workers, 20% more than last year.

The economy expanded at a robust 4.2% annual rate in the April-June quarter, the strongest growth in four years. That growth was lifted by solid consumer spending, which increased 3.8%.

Analysts forecast growth will slip in the current July-September quarter to a still-healthy 3% annual pace.

Given the expected real GDP growth in Q3, the Fed is expected to continue on its course of gradually raising interest rates, says Desjardins in a research note.

Christopher Rugaber, The Associated Press

Christopher Rugaber is a reporter with The Associated Press,  an American not-for-profit news agency headquartered in New York City and founded in 1846.