Online purchases boost US retail sales

[WASHINGTON] US retail sales unexpectedly increased in August as a surge in online and furniture store purchases offset a continued decline at car dealerships, which could temper expectations for a sharp slowdown in economic growth in the third quarter.

The surprise rebound in retail sales reported by the Commerce Department on Thursday came as economists have been downgrading their gross domestic product (GDP) estimates for the current quarter, citing plunging motor vehicle sales, which are the result of an acute inventory shortage.

Sales last month were likely boosted by back-to-school shopping and child tax credit payments from the government.

"Consumer spending will continue to lead the economic recovery," said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania.

Retail sales rose 0.7 per cent last month. Data for July was revised down to show retail sales declining 1.8 per cent instead of 1.1 per cent as previously reported. Economists polled by Reuters had forecast retail sales would drop 0.8 per cent. Sales increased 15.1 per cent from a year ago and are well above their pre-pandemic level.

They are holding up even as spending is shifting back from goods to services like travel and entertainment, though soaring Covid-19 infections are likely delaying the services spending boom. Retail sales are mostly goods, with services such as healthcare, education, travel and hotel accommodation making up the remaining portion of consumer spending.

Online retail sales rebounded 5.3 per cent after tumbling 4.6 per cent in July. Most school districts started their 2021-2022 academic year in August, with in-person learning resuming after last year's shift to online classes because of the pandemic.

Qualifying households in mid-July started receiving money under the expanded child tax credit program, which will run through December. Sales at clothing stores edged up 0.1 per cent last month.

Sales at building material stores rose 0.9 per cent and receipts at furniture stores increased 3.7 per cent.

But sales at car dealerships tumbled 3.6 per cent after declining 4.6 per cent in July. An ongoing global shortage of microchips, which is forcing carmakers to cut production, is leading to a scarcity of inventory at showrooms.

Excluding cars, petrol, building materials and food services, retail sales rebounded 2.5 per cent last month after a downwardly revised 1.9 per cent decline in July.

These so-called core retail sales correspond most closely to the consumer spending component of GDP. They were previously estimated to have dropped 1 per cent in July.

Tanking motor vehicle sales and struggles by businesses to replenish stocks have prompted economists to slash their GDP growth estimates for the third quarter.

On Wednesday, economists at JPMorgan again trimmed their third-quarter GDP growth forecast to a 5 per cent annualised rate from a 7 per cent pace. Goldman Sachs early this month cut its estimate to a 3.5 per cent rate from a 5.25 per cent pace.

REUTERS