Consumers spent more in August during the back-to-school season, even as gas prices climbed. Total sales at retail stores and restaurants increased by 1.2% from a month earlier and by 6.0% from a year ago.
While some of the increase reflected higher overall prices, the larger share was driven by stronger demand. The Consumer Price Index rose by only 0.4% in August, meaning most of the retail gain reflected real volume rather than price increases.
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The increase was broad-based, with 12 of the 13 categories posting stronger spending. That said, it is unclear whether spending will remain that resilient from September onward.
Energy prices have risen further since August, with gasoline crossing $5 and diesel exceeding $6. At the same time, mortgage rates have climbed near 7%.
With long-term borrowing costs and inflation expectations both rising, consumer spending will most likely come under pressure.
While August’s rebound was encouraging, we remain cautious about the near-term outlook. For now, the three-month moving average annualized rate for overall retail sales has slowed to 4.9%, the lowest since February.
For the third quarter, consumer spending will continue to be the main driver of overall growth. But it will most likely be somewhat weaker than projected at the beginning of the quarter.
Inside the data
Total retail and food services sales came in at $773.9 billion in August, rising by 1.2% from the previous month and by 6.0% from a year ago, the Commerce Department reported on Wednesday.
July was revised from a drop of 0.6% to a decline of 0.5%. The June through August period was up by 6.0% from the same period a year ago.
Excluding autos, sales rose by 1.4% on the month and by 6.9% from a year ago. Excluding both autos and gas, sales rose by 1.2% on the month and by 5.6% from a year ago.
Gasoline stations led monthly gains at 3.1%, reflecting the price surge, followed by nonstore retailers at 2.6%, miscellaneous store retailers at 1.9%, electronics and appliances at 1.6%, and both sporting goods and food services at 1.2%.
On a year-over-year basis, gasoline stations posted the largest gain at 21.0%, driven almost entirely by higher prices. Miscellaneous store retailers rose by 14.0%, sporting goods by 10.7%, and nonstore retailers by 9.9%.
Building materials and garden equipment was the only category to decline, falling by 0.2% on the month. Food and beverage stores were essentially flat at 0.4% monthly and 0.5% annually, the weakest year-over-year growth of any category. Motor vehicles and parts rose a modest 0.6% on the month and 2.1% from a year ago.
