Retail Sales Rise Again in August, Bucking Economic Slowdown

[source image]
Dow Jones NewsSep 16, 12:33 PM UTC
DJ Retail Sales Rise Again in August, Bucking Economic Slowdown -- Barrons.com

By Sabrina Escobar

 

Retail sales topped expectations in August, continuing to rise in spite of fears that economic uncertainty would hold Americans back from spending.

 

Retail sales increased 0.6% in August from July, according to data released Tuesday by the Census Bureau. Economists polled by FactSet expected a 0.2% increase.

 

Sales rose 5% on an annual basis.

 

This is breaking news. Read a preview of the August retail sales report below and check back for more analysis soon.

 

By most accounts, August was a weak month for the U.S. economy. Hiring slowed, unemployment rose, and inflation ticked higher. Consumer spending could buck the trend.

 

Economists are expecting retail sales rose by 0.2% in August from July, according to FactSet consensus estimates.

 

Once gas and auto sales are stripped out, sales are projected to rise 0.4% on a monthly basis, reflecting economists' assumptions that weaker car sales volumes will weigh on the headline reading.

 

"Zooming out, consumption activity and retail sales in particular have continued to chug along, not accelerating but not meaningfully decelerating either," writes Frances Donald, chief economist at RBC Economics.

 

Resilient spending by higher-income households is disproportionately lifting consumer activity, Donald adds. A record-breaking bull run in equities and soaring home prices have boosted household wealth for many, allowing consumers to spend despite signs the broader economy is softening.

 

American employers added relatively few jobs throughout the summer months -- the labor market actually lost 12,000 jobs in June -- and the unemployment rate rose to 4.3% in August, the highest reading since 2021. Recent revisions to 2024's labor market data suggest the economy added nearly one million fewer jobs in the 12 months through March, marking the biggest revision in estimated annual hiring in decades.

 

The payroll revisions make the past year of solid retail sales growth "all the more remarkable," write Glenmede's Jason Pride and Michael Reynolds.

 

"It essentially means that aggregate consumer spending has held up well despite tepid jobs growth, pointing to a baseline resilience to U.S. household spending which is expected to have continued into August," they add.

 

Indeed, Bank of America credit and debit card data suggest the report could still surprise to the upside. BofA economist Aditya Bhave notes total card spending rose by 0.4% in the month, or 1.7% year over year, with card spending accelerating for both lower and higher income households throughout the month.

 

The divergence between job and spending growth isn't likely to last, Bhave argues, leaving the economic outlook at a crossroads: either spending weakens as consumers grow more worried about their employment and income prospects, or the labor market recovers to match the strength in consumer spending. That said, Bhave leans toward the latter scenario, taking a more bullish outlook on spending in the coming months.

 

So does Stephanie Link, chief investment strategist and portfolio manager at Hightower Advisors. She points to recent commentary from company executives vouching for consumer resilience -- including Bank of America Chief Financial Officer Alastair Borthwick, Wells Fargo CFO Michael Santomassimo, and Walmart CEO Doug McMillon.

 

"We're seeing it and hearing it from companies -- if you have the right product or the right services, the consumer is spending," she says.

 

The next few months, however, will be critical in gauging how tariffs reshape consumer behavior, Pride and Reynolds write. Tariff-induced price increases will likely collide with stretched household budgets ahead of the holiday season -- a dynamic the Federal Reserve will be keeping a close eye on as it decides on monetary policy in the coming months.

 

The retail sales report will be the last major economic datapoint to be released before the central bank wraps up the September meeting of the Federal Open Market Committee. Betting markets have factored in a 96% probability that policymakers cut interest rates by a quarter of a percentage point.

 

Write to Sabrina Escobar at [e-mail]

 

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

 

September 16, 2025 08:33 ET (12:33 GMT)

 
Copyright © 2025 Dow Jones & Company, Inc.