Consumers in August showed just how mindful they can be when it comes to what they were willing to buy and where.
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Early data from the U.S. Census Bureau on Tuesday showed that August retail sales inched up 0.1 percent to $710.77 billion, from a revised 1.1 percent gain to $710.1 billion in July. The August data point was also up 2.1 percent, unadjusted, from August 2023 levels. Data estimates are adjusted for seasonal variation and holiday, but not for price changes.
Retail trade sales were up 0.1 percent from July, and up 2 percent from last year. However, sales at apparel and accessories retailers slipped 0.7 percent to $26.1 billion in August, while sales at department store retailers were down 1.1 percent to $10.83 billion. Sales at nonstore retailers, such as e-commerce sites, rose nearly 1.4 percent to $123.59 billion.
Tim Quinlan and Shannon Seery Grein, economists at Wells Fargo, noted in a research report that August retail sales is the latest example of a choosy consumer who continues to spend even as the pace of growth is slowing sharply. “Despite a big gain for e-commerce, broad-based declines across store types offer further confirmation of lost swagger in consumer spending,” they noted.
While the headline number reflects an overall uptick of 0.1 percent, that was helped in part by a smaller-than-expected drop in car sales. For the most part, every retail category saw declines in August, even food and beverage stores. And sales at general merchandise stores were down 0.3 percent, led by the 1.1 percent drop in sales at department store retailers. Despite the broad-based weakness, the headline 0.1 percent uptick was boosted by the 1.4 percent gain in e-commerce sales.
According to the Wells Fargo economists, “The consumer may technically be unstoppable, but in recent months spending has undeniably slowed sharply.” They expect the Fed to cut interest rates at the conclusion of Wednesday’s FOMC meeting, but by how much remains a debate.
“Seven categories of retailers reported declines in sales last month and a pullback in some discretionary-like categories demonstrates choosier consumer behavior,” the Wells Fargo economists concluded. “Nothing in this report says everything is fine, spending has slowed.” Yet at the same time, they noted how nothing in the data screams a dramatic pullback in spending that would be consistent with a recession.
National Retail Federation (NRF), a retail trade group, said core retail sales in August, defined by NRF as excluding automobile dealers, gasoline stations and restaurants, were up 0.3 percent seasonally adjusted month-over-month, and up 3.3 percent, unadjusted, year-over-year.
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NRF’s chief economist Jack Kleinhenz said the data points for August show that retail sales were helped by rising wages against a backdrop of falling inflatio n.
“These numbers show the continued resiliency of the American consumer,” Kleinhenz said. “While sales growth decelerated from last month’s pace, there is little hint of consumer spending unraveling.”
The economist said that easing inflation has provided some spending boost to shoppers, and that the “interest rate cuts expected to come from the Fed should help create a more positive environment for consumers in the future.”
“August retail sales results demonstrated a continuation of recent themes, including overall reasonable spending levels with relative softness in discretionary categories like consumer electronics, home improvement and home furnishings,” said David Silverman, senior director at credit ratings firm Fitch Ratings.
The credit analyst said August’s retail sales report “offer comfort that we are unlikely to see a material consumer spending decline in the near term.” Fitch continues to expect a choppy discretionary goods environment, with sales volumes in many categories expected to be negative in 2024. “Companies best positioned are those with strong customer connections and conservative inventory and expense plans, particularly into what is likely to be a promotional holiday season ,” Silverman concluded.
Retailers Face a 'Meh' Consumer in the Second Half
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