The strong retail sales for August were not only a welcome surprise for retailers after months of decline, but they also showed the enduring impact of the pandemic as consumers relied less on human contact and increasingly shopped at home.
Non-store spending led the overall increase in August retail sales.
Non-store spending—which includes spending at online retailers—led the overall 0.7% increase in August retail sales, posting a 5.3% gain over the month. That was followed by furniture at 3.7%, general merchandises at 3.5%, and food and beverage spending at 1.8%.
Restaurant sales, which are directly affected by consumer fears over contracting the highly contagious delta variant, posted no change in August, after a hot run since March.
We estimate a slightly lower gain at about 0.2% to no change for the overall real sales volumes in August after adjusting for inflation, which rose 0.3% according to price data released on Tuesday. Official data on real retail sales in August will only be available in the next month’s reports.
Still, this would be the first time that sales volumes had not declined in the last five months, while nominal sales—not adjusted for inflation—have been on a choppy run since March. It is important to note that only real retail sales volumes matter in the government’s gross domestic product calculations, which are adjusted for inflation.
Another factor behind the August increase was the effect of the Child Tax Credit program, which was rolled out in late July. Those payments were crucial in boosting spending on categories such as food, clothing and supplies, helping to offset lower sales in other categories.
The takeaway
The predicted deceleration in consumer retail spending in July and August because of the resurgence of the delta variant will continue to put downward pressure on GDP growth this quarter. But consumers, and retailers, have shown that they will adapt in the face of what is an ever-changing landscape of restrictions.
We expect that once the delta variant surge subsides, spending will advance in the last quarter of the year, leading to a higher GDP growth rate in the same period, well above its long-term trend of 1.8%.
For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.
