US retail sales rebound more than expected in August; import prices surge

WASHINGTON – US retail sales rebounded sharply in August as households boosted purchases of a range of goods while also spending more at restaurants and bars, reinforcing the economy’s resilience even as consumers grow more anxious about high inflation.

Strong demand, together with other data on Sept 16 showing a surge in import prices in August, sealed the argument for a widely anticipated interest rate increase from the Federal Reserve later in the day, economists said.

The reports followed data in September showing producer and consumer prices accelerated in August, while the labour market regained its poise after wobbling through much of summer.

“This reaffirms that the economy is more than capable of handling higher interest rates, providing the Fed plenty of scope to hike to get inflation under control,” said Bradley Saunders, North America economist at Capital Economics.

Retail sales jumped 1.2 per cent in August, the largest increase since March, after a revised 0.5 per cent drop in July, the Commerce Department’s Census Bureau said.

Economists polled by Reuters had forecast retail sales, which are mostly goods and are not adjusted for inflation, would rebound 0.8 per cent after a previously reported 0.6 per cent drop in July.

The decline in July was the first in nine months. Sales increased 6.0 per cent on a year-over-year basis in August.

August’s increase also partially reflected higher petrol prices, which lifted receipts at service stations.

Households have continued to spend despite stubbornly high inflation because of the oil price shock and supply chain strains from the US-led war with Iran. Consumers have, however, become more selective and are seeking lower-priced goods. Consumer sentiment deteriorated in September.

Spending is being supported by steady wage growth and recent stock market gains. Households are also saving less and tapping into their nest eggs. The broad rise in sales in August was led by a 2.6 per cent increase in receipts at non-store retailers, likely boosted by households restocking for the new school year as well as the fading drag from an earlier than usual Amazon Prime sales promotion. Sales at clothing stores rose 0.7 per cent, also likely lifted by back-to-school purchases.

Receipts at vehicle and parts dealers increased 0.6 per cent, while those at furniture stores rose by 0.9 per cent. Electronics and appliance store sales jumped 1.6 per cent, and receipts at sporting goods, hobby, musical instrument and book retailers were 1.2 per cent higher.

But receipts at building material and garden equipment retailers fell 0.2 per cent. Sales at food services and drinking places, the only services component in the report, increased 1.2 per cent after edging up 0.5 per cent in July. This category is considered a key measure of household finances.

Core retail sales surge

Retail sales excluding automobiles, petrol, building materials and food services surged 1.4 per cent in August, the largest gain since September 2024, after an unrevised 0.4 per cent decline in July. Economists had forecast these so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, would rise 0.4 per cent.

Economic growth estimates for the third quarter currently exceed a 2.0 per cent annualised rate. The economy grew at a 1.5 per cent pace last quarter.

US stocks were mostly higher. The dollar gained versus a basket of currencies. US Treasury yields slipped.

A separate report from the Labor Department’s Bureau of Labor Statistics showed import prices rebounded 0.7 per cent in August amid solid increases in the costs of capital and consumer goods, after declining by 0.3 per cent for two straight months. Economists had forecast import prices, which exclude tariffs, would rise 0.4 per cent.

In the 12 months through August, import prices soared 7.0 per cent, the largest increase since August 2022, after advancing 6.1 per cent in July. The strength in import prices suggested inflation could rise further in the coming months.

The government last week reported accelerations in consumer and producer prices in August. Imported capital goods prices increased 0.9 per cent in August after rising 1.0 per cent in July.

Prices for non-electrical machinery gained 1.2 per cent for the second straight month in August. An artificial intelligence spending boom is driving up prices for imported capital goods.

Prices for imported consumer goods, excluding automotives, rebounded 0.5 per cent after two straight monthly decreases. The cost of imported automotive vehicles, parts and engines was unchanged.

Prices of imported fuel slipped 0.1 per cent, declining for a third straight month. Imported food prices edged up 0.1 per cent.

Excluding food and fuels, import prices jumped 0.8 per cent after rising 0.3 per cent in July. The so-called core imported inflation increased 5.6 per cent in the 12 months through August. REUTERS