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The 0.2 percent increase in August followed a 0.7 percent gain in July that was larger than previously reported, Commerce Department figures showed Tuesday in Washington. The median forecast of 84 economists surveyed by Bloomberg called for a 0.3 percent advance.
Although confidence has taken a hit from stock-market turmoil and global-growth concerns, the data show households are still putting their savings from cheap energy to work. More jobs and higher pay would go a long way in supporting household spending, which Federal Reserve policy makers are watching as they consider raising interest rates as soon as this week.
“The trend is strong and robust,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics USA in New York, who correctly forecast the increase in retail sales. Tuesday’s data shows spending is “resistant to outside shocks, and that’s quite important at this point in time.”
Estimates in the Bloomberg survey ranged from a decrease of 0.1 percent to a 0.6 percent gain. July retail sales were previously reported as up 0.6 percent. June data was unrevised at little changed.
Another report showed that while consumers are holding up, factories are struggling. Manufacturing in the New York region contracted in September for a second straight month, reflecting declining orders and employment, according to figures from the Federal Reserve Bank of New York.
Broad-Based Gains
Ten of 13 major retail categories showed increases last month, including auto dealers, restaurants and clothing stores, the Commerce Department’s report showed.
A 1.8 percent drop in receipts at gas stations weighed on the retail sales figures in August as the cost of a gallon of regular gasoline fell 7.5 percent last month. The government’s data aren’t adjusted for changes in prices.
Sales climbed 0.7 percent at automobile and parts dealers last month after rising 1.3 percent in July. The data mesh with industry data from Ward’s Automotive Group that showed sales of cars and light trucks soared to a 17.7 million annualized rate in August, the most since July 2005. Ford Motor Co., Fiat Chrysler Automobiles NV and General Motors Co. all reported robust sales powered by pickups and sport utility vehicles.
Retail sales excluding autos increased 0.1 percent in August after advancing 0.6 percent the month before, the Commerce Department report showed. They were projected to rise 0.2 percent, according to the Bloomberg survey median.
Calculating GDP
The figures used to calculate gross domestic product, which exclude categories such as food services, auto dealers, home-improvement stores and service stations, increased 0.4 percent last month after rising 0.6 percent. The Bloomberg survey median projected a 0.3 percent advance.
Tuesday’s report confirms a steady-as-she-goes narrative that’s characterized consumer spending throughout the recovery. In turn, spending has become a major pillar of support for growth. The economy expanded at a 3.7 percent annualized rate in the second quarter on bigger gains in consumer and business spending, as well as a surge in inventories.
Lower energy prices and solid labor market progress are supporting consumption, which economists surveyed by Bloomberg project will grow at around a 3 percent annualized pace for the second half of the year. Payrolls climbed by 173,000 last month while the unemployment rate dropped to a seven-year low of 5.1 percent.
Wages, Employment
Still, wages have yet to significantly pick up, which may be causing some households to be more cautious about their spending plans. Hourly pay is still tracking in the same narrow range that’s characterized the current recovery.
Meanwhile household wealth took a hit as the Standard & Poor’s 500 Index fell 6.3 percent last month, the most since May 2012. That decline hurt consumer confidence, with the University of Michigan index this month falling to the lowest level in a year.
Fed policy makers are watching financial markets as they consider when to raise their benchmark interest rate for the first time since 2006. They will announce their decision at the conclusion of their two-day meeting on Sept. 17.
Article published on Bloomberg Business – Sept. 15, 2015
