Lured by back-to-school sales and tax-free holidays in several states, U.S. consumers opened their wallets a little wider in August, lifting retail sales a slightly stronger-than-expected 0.4%. Consumers spent more on just over half of all major categories. After four monthly declines, clothing sales jumped 1.2%, as parents could no longer postpone back-to-school wear for the kids. As well, after dieting for five months, consumers binged at grocery stores, though most of the gain likely reflected a bounce in food costs.
Meantime, housing-related items remain in the cellar, with furniture sales falling for the fourth time in five months, and appliances more than retracing two previous monthly gains. The bumpy ride for autos continues, with sales at motor vehicle dealers falling 1.1% in August. They have gained no traction in the past four months, and are stuck at one-third of pre-recession levels. Still, ''core'' retail sales (which excludes cars, gas and building materials) rose a decent 0.6%, suggesting some upside risk to our estimate of near 2% growth in consumer spending in Q3.
The Bottom Line: The incentive-driven gain in retail sales in August is unlikely to be repeated in September. Although household balance sheets have improved, real consumer spending will likely
continue to grow at a subdued 2% rate (the average in the first half of the year) until job growth improves.
Sal Guatieri
