U.S. retail sales trail forecasts as autos, apparel decline

THE VALUE of overall United States retail sales climbed 0.1 percent in August. / BLOOMBERG NEWS FILE PHOTO/MICHAEL NAGLE
THE VALUE of overall United States retail sales climbed 0.1 percent in August. / BLOOMBERG NEWS FILE PHOTO/MICHAEL NAGLE

NEW YORK – United States retail sales rose by less than forecast in August following an upwardly revised July gain as purchases of automobiles and clothing fell, suggesting households took a breather from spending.

The value of overall sales climbed 0.1 percent from the prior month after a 0.7 percent increase in July, Commerce Department figures showed Friday. The median forecast of economists surveyed by Bloomberg called for a 0.4 percent gain.

Combined results from July and August indicate support from a strong job market and more after-tax pay during the back-to-school shopping season. While household spending, the biggest part of the economy, continues to drive economic growth this quarter, still-tepid pay gains and higher borrowing costs are among reasons why it’s projected to cool from its second-quarter pace.

With the revisions to July, “the net result is fairly strong spending growth so far” in the quarter, Jim O’Sullivan, chief U.S. economist at High Frequency Economics Ltd., said in a research note.

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A separate report Friday from the Federal Reserve showed U.S. factory production rose in August amid broad-based gains that included automakers, providing support for economic growth this quarter.

The retail sales figures aren’t adjusted for price changes. The data indicated that the biggest plunge in clothing prices since 1949 depressed August results, at the same time as higher gasoline costs gave them a boost.

Sales fell 1.7 percent at clothing stores, the biggest drop since February 2017. In contrast, receipts climbed 1.7 percent at filling stations, as Labor Department consumer-price data showed seasonally adjusted gasoline prices increased 3 percent, the most since April.

Estimates for retail sales in the Bloomberg survey ranged from a decline of 0.1 percent to a gain of 0.7 percent.

Control group

So-called retail control-group sales – which exclude food services, auto dealers, building-materials stores and gasoline stations – advanced 0.1 percent after an upwardly revised 0.8 percent gain. The median estimate was for a 0.4 percent increase.

Sales at auto and parts dealers fell 0.8 percent, the most since February, after decreasing 0.1 percent in the previous month, the Commerce Department data showed. According to industry reports for August, except Ford Motor Co., all major automakers’ sales missed analyst estimates as demand plunged for passenger cars.

Excluding autos and gasoline, retail sales rose 0.2 percent, after an upwardly revised 0.9 percent gain the previous month.

What Bloomberg economists say

“The economy is solid, but the pace of consumer spending registered in the second quarter was unsustainable and personal-consumption growth is due to moderate in the second half of the year,” said Yelena Shulyatyeva and Carl Riccadonna, economists at Bloomberg Economics. “The diminished momentum from consumers comes ahead of disruptions in the data from Hurricane Florence. September auto sales will provide a first glimpse of the magnitude of the storm’s impact on consumer statistics.”

The results also got less of a boost from restaurants and bars after three months of outsize gains. Receipts at food services and drinking establishments cooled to a 0.2 percent increase in August, following an upwardly revised 1.6 percent in July.

Economic data, including on retail sales, may be distorted in coming months depending on the extent of damage and flooding from Hurricane Florence in the southeastern U.S.

Even with the slower gain, nine of 13 major retail categories showed increases, according to the Commerce Department data. The advance was led by a 2.3 percent rise at miscellaneous stores. Nonstore retailers, which include online vendors, rose 0.7 percent following a 1.5 percent increase.

Health and personal care stores, along with electronics and appliance sellers, also saw gains.

Shobhana Chandra is a reporter for Bloomberg News.