The numbers: Sales at U.S. retail stores rose sharply in August in sign that Americans continued to spend gobs of money despite the spread of delta, though high inflation likely accounted for some of the increase.
Retail sales increased 0.7% last month, the government said Thursday . Economists polled by The Wall Street Journal had forecast a 0.7% drop.
The increase in spending was not quite as strong as it looked, though. The decline in sales in July was revised to 1.8% from a preliminary 1.1%.
Still, sales advanced in almost every major retail category in August and they rose a much stronger 1.8% if autos are excluded. A widespread shortage of new cars and trucks has depressed sales at auto dealers.
Retail sales are 15% higher compared to one year ago. What’s more, broader measures of consumer spending have also remained fairly healthy even as the delta strain of the coronavirus metastasized through the country.
Big picture: Americans are not spending as much as they were in the spring, but they are still spending plenty of money. More than enough, economists say, to keep the U.S. recovery from petering out.
What’s changed is what they are spending their money on. People bought a lot of goods early in the pandemic when they were cooped up at home. Things like groceries, computers, cell phones, furniture and the like.
Now they are also spending a lot more on services they shunned during the pandemic: Dining out, hotel rentals, theater tickets or airfare, to cite some examples.
The surge in delta cases has caused demand for these services to slow recently, Sales at restaurants, for example, were flat in August. Yet economists predict spending will bounce back once the latest coronavirus wave recedes. Caseloads in the U.S. are already falling.
Key details: Sales grew the most for internet retailers such as Amazon, reversing a big decline in July. Receipts jumped 5.3%.
Sales also rose at department stores, groceries, home centers, gas stations and outlets that sell home furnishings.
Part of the increase reflects higher prices, particularly for groceries and building materials. Inflation has risen in 2021 at the fastest rate in three decades.
The biggest decline in sales last month took place at car dealers, where receipts sank 3.6% Automakers can’t produce enough new cars and trucks to sate the appetite of buyers because of a global shortage of computer chips.
Auto purchases account for about one-fifth of all retail sales.
Sales also fell at big-box electronics retailers and stores that sell hobby items and sports equipment.
What they are saying? “All in all, this was a solid showing by U.S. consumers, expected by no one, suggesting the economy continued to hum in August,” said chief economist Chris Low at FHN Financial.
“As Covid cases fall, look for consumption, particularly in services, to pick up in the months ahead,” said Neil Dutta, head of macroeconomics at Renaissance Macro Research.
Market reaction: The Dow Jones Industrial Average (DOW:DJIA) and S&P 500 (S&P:SPX) fell in Thursday trades.