Consumers Open Wallets Again as Retail Sales Top Market Estimates

Consumers opened their wallets again in August after an unexpected decline in the previous month, new government data show.

U.S. retail sales surged 1.2 percent last month, from a 0.5 percent drop in July, according to a report released by the U.S. Census Bureau on Wednesday. This represented the highest increase since March.

A rebound was widely expected—economists had projected a 0.8 percent gain—as July’s decline was fueled mainly by seasonal factors, including Amazon moving Prime Day a month earlier and FIFA World Cup festivities concluding.

On a 12-month basis, retail sales edged up 6 percent.

Sales at gasoline stations led the way, with receipts surging more than 3 percent. But even excluding commerce for automobiles and gasoline stations, transactions were broad-based and rose more than 1 percent.

Digital retailers were the next-largest category, with sales climbing almost 3 percent. This was followed by miscellaneous store retailers (1.9 percent), electronics and appliances (1.6 percent), and restaurants and bars (1.2 percent).

Transactions at building materials and garden equipment stores were the only ones to decline, falling by 0.2 percent.

A key measure that contributes to GDP growth calculations—the retail sales control group—also bounced back, surging by a higher-than-expected 1.4 percent increase, from a 0.4 percent decrease. This represented the best reading since September 2024.

The retail sales control group strips out non-core sectors such as auto dealerships, gasoline stations, office supplies, and tobacco.

Economic growth is expected to be robust in the third quarter. The Atlanta Federal Reserve’s widely watched GDPNow Model forecasts an expansion of more than 4 percent.

‘Don’t Underestimate the Consumer’

Bank of America economists anticipated a solid month for consumer spending.

In its monthly Consumer Checkpoint report, the bank reported that total card spending per household jumped 0.9 percent, with discretionary services (restaurants, entertainment, travel, and hospitality) supporting growth.

“Consumers still appear to be focused on value. Spending at general merchandise and big-box retailers continues to outperform more traditional retailers, as evidenced during the back-to-school season,” the report reads. “This suggests households are actively seeking lower-cost alternatives while maintaining spending.”

Back-to-school shopping likely contributed significantly to the strong retail sales data. The National Retail Federation projected spending to reach a record high of more than $43 billion for K–12 students and almost $104 billion for college students.

Households continue to shop even as they contend with higher energy costs. Frustrated over stubborn inflation, consumers’ sentiment has deteriorated sharply this year.

The national average for a gallon of gasoline is firmly above $4.30, according to the American Automobile Association.

But economic observers note that strong household balance sheets and a resilient labor market should continue allowing consumers to power the wider economy. Additionally, household debt fell in the previous quarter for the first time in six years.

“The macro data has been surprisingly positive,” Ted Rossman, principal consumer finance analyst at Money Management International, told The Epoch Times.

At the same time, inflation remains a thorn in the public’s back as higher prices eat into their paychecks. Real (inflation-adjusted) hourly wages turned negative last month, and credit card delinquency rates have ticked up.

Still, if the past few years suggest anything, Rossman said, it is “don’t underestimate the consumer.”

“We would have thought a few years ago that we would have seen a more dramatic pullback to some of these extras like travel and dining, and it’s just been up, up, and up,” he added.

The Atlanta Fed estimates consumer spending will account for more than half of the third-quarter expansion, followed by changes in private inventories and business investment.

Overall, solid economic fundamentals could add to the case for a Federal Reserve interest rate hike later on Sept. 16. Investors have widely penciled in a quarter-point increase as the central bank navigates renewed headline inflation and surging Treasury bond yields.