Higher petrol prices lift US retail sales in August; weekly jobless claims rise slightly
US RETAIL sales increased more than expected in August as a surge in petrol prices boosted receipts at service stations, but the trend in underlying spending on goods slowed as Americans grappled with high inflation.
The report from the Commerce Department on Thursday (Sep 14) also showed spending on goods in July was not as robust as initially thought. The data, however, did not change expectations for solid growth in overall consumer spending this quarter amid evidence of splurging on services like concerts, movies and sporting events, despite worries about inflation.
It was unlikely to have an impact on near-term monetary policy, with the Federal Reserve expected to keep interest rates unchanged next Wednesday.
“The economy is in a good place for now with moderate consumer demand that is not hot enough to bring inflation back to life,” said Christopher Rupkey, chief economist at FWDBONDS in New York.
Retail sales rose 0.6 per cent last month. Data for July was revised lower to show sales advancing 0.5 per cent instead of the previously reported 0.7 per cent. Economists polled by Reuters had forecast retail sales gaining 0.2 per cent. Retail sales are mostly goods and are not adjusted for inflation. They rose 2.5 per cent on a year-on-year basis.
Receipts at petrol stations rebounded 5.2 per cent after declining 10.3 per cent in July. Petrol prices accelerated in August, peaking at US$3.984 per gallon in the third week of the month, the highest this year, according to data from the US Energy Information Administration. That compared to US$3.676 per gallon during the same period in July.
Higher petrol prices boosted producer prices in August, other data from the Labor Department showed on Thursday.
Excluding petrol stations, retail sales rose 0.2 per cent last month. The value of sales at motor dealerships increased 0.3 per cent. Online sales were unchanged after accelerating 1.5 per cent in July. Amazon’s Prime Day promotion in July, which was the biggest on record, and parents starting their back-to-school shopping early, likely pulled forward some spending.
Receipts at furniture stores dropped 1.0 per cent. But electronics and appliance store sales rose 0.7 per cent. Clothing store sales increased 0.9 per cent. Receipts at building material and garden equipment supplies dealers gained 0.1 per cent.
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But consumers cut back spending on sporting goods, hobbies, books and musical instruments. Grocery store sales rose as did receipts at department stores. Sales at food services and drinking places, the only services category in the retail sales report, rose 0.3 per cent after increasing 0.8 per cent in July. Economists view dining out as a key indicator of household finances.
US stocks opened higher. The US dollar rose against a basket of currencies. US Treasury prices fell.
Dimming outlook
Though spending remains supported by higher wages from a tight labour market, the outlook is darkening. Excess savings accumulated during the Covid-19 pandemic continue to be run down. Credit card balances have risen sharply, with delinquencies at an 11-year high in the second quarter, according to recent data from the New York Federal Reserve.
Millions of Americans resume payments on student loans in October. Goldman Sachs estimates that the resumption of payments in full would be equal to roughly US$70 billion, or around 0.3 per cent of disposable personal income.
Excluding automobiles, petrol, building materials and food services, retail sales edged up 0.1 per cent in August. Data for July was revised down to show these so-called core retail sales up 0.7 per cent instead of the previously reported 1.0 per cent.
Core retail sales correspond most closely with the consumer spending component of GDP. Despite August’s tepid core sales and the downward revision to July’s data, strong spending on services is expected, which should lift consumption.
Gross domestic product growth estimates for the third quarter are currently as high as a 5.6 per cent annualised rate. The economy grew at a 2.1 per cent pace in the April-June quarter.
The economy’s resilience is underscored by the labour market, which remains tight.
A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits rose to a seasonally adjusted 220,000 for the week ended Sep 9 from 217,000 the prior week.
Economists had forecast 225,000 claims for the latest week. Claims are on the lower end of their 194,000-265,000 range for this year.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, rose 4,000 to 1.688 million during the week ending Sep 2, the claims report showed. The so-called continuing claims remain low by historical standards, a sign that some laid-off workers are experiencing short bouts of unemployment.
“The claims data are a reminder that the job market remains relatively tight,” said Nancy Vanden Houten, lead US economist at Oxford Economics in New York.
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