Retail sales growth slows in August as consumers struggle to keep up with inflation

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Retail sales were better than expected in August as price increases across many industries offset a significant drop in gas station receipts, the Census Bureau reported Thursday.

Retail presale sales for the month were up 0.3% from July, outperforming the Dow Jones estimate without change. The total is not adjusted for inflation, which rose 0.1% in August, suggesting that spending outpaced price increases.

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Inflation according to the consumer price index increased by 8.3% in the past year through August, while retail sales increased by 9.3%.

Excluding cars, however, sales fell 0.3% for the month, below the estimate for a 0.1% increase. Excluding cars and petrol, sales increased by 0.3%.

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Sales at auto and parts dealers led all categories, up 2.8%, helping to offset the 4.2% drop at gas stations, whose receipts plummeted as prices fell sharply. Online sales also fell 0.7%, while bar and restaurant sales increased 1.1%.

Revisions to July’s figures pointed to further consumer concerns, initially unchanged but down 0.4%.

The ‘control’ group that economists use to cut retail sales was also unchanged from July. The group excludes sales from car dealerships, building materials retailers, gas stations, office supply stores, mobile homes and tobacconists, and is what the government uses to calculate the share of retail sales in GDP.

“Higher inflation has boosted sales, but volumes are clearly falling because sales are actually negative,” said Peter Boockvar, Chief Investment Officer at Bleakley Advisory Group. “Core sales well below expectations will lead to a cut in GDP estimates for the third quarter, as stated.”

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Ian Shepherdson, chief economist at Pantheon Macroeconomics, called the release “a mixed report, but we see no cause for concern.” He said the housing slump will weigh on some related sales, but overall spending should rise as real incomes rise.

Retail data led a busy day for economic data.

Elsewhere, first-time jobless claims for the week ending Sept. 10 totaled 213,000, down 5,000 from the previous week and ahead of the estimate of 225,000. Import prices fell by 1% in August, less than the expected decline of 1.2%.

Two meters of production showed mixed results: The New York Federal Reserve’s Empire State Manufacturing Index for September showed a value of -1.5, a huge jump of 30 points from the previous month. However, the Philadelphia Fed’s gauge came in at -9.9, a sharp drop from August’s 6.2 and below expectations for a positive reading of 2.3.

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The two Fed readings reflect the percentage of companies reporting expansion versus contraction, suggesting that manufacturing has largely been in a contraction this month.

However, the reports pointed to some easing of price pressures. For New York, the indices for prices paid and prices received fell by 15.9 and 9.1 points respectively, although both remained firmly in growth territory at 39.6 and 23.6. In Philadelphia, prices paid fell by almost 14 points, but prices received rose by 6.3 points. Those indices were 29.8 and 29.6 respectively, indicating that prices are generally still rising, but at a slower pace.