The cash-for-clunkers program drove up vehicle and parts sales more than 10% in August, the
best showing since the sales incentives that immediately followed 9/11. Ex-autos, sales still raced 1.1%, fuelled by higher gasoline prices (service station receipts were up more than 5%).
The big surprise was that retail sales excluding gas and autos actually advanced 0.6%, after falling a cumulative 1.8% in the past five months. Back-to-school spending turned out to be better than the surveys and preliminary chain store results suggested. Sales at department, clothing and sporting goods stores all grew more than 2% in the month.
The Bottom Line: It had been believed that rebate-induced vehicle purchases diverted discretionary spending away from other areas, and kept a damper on back-to-school outlays. But today’s data say otherwise, and are surprising given the drop in jobs during the month. Next month’s data will be the acid test, with the cash-for-clunkers program over and the kids already in school.
Improving consumer confidence might not be enough to sustain spending without growth in jobs and incomes. However, even if there is a setback (payback) in September, the quarter as a whole is looking good. Real PCE will likely expand at a 3% annual rate in Q3, leading comparable growth in the economy as a whole.
Michael Gregory
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