Despite High Inflation and Oil-Price Shock, Americans Kept Spending—August Retail Sales Up 1.2%, Beating Expectations

[Financial News] United States retail sales in August far exceeded market expectations, posting a strong rebound after declining the previous month. The data confirmed that consumer spending, a key pillar of the United States economy, remains solid despite high inflation and an oil-price shock. It also strengthened the case for additional interest-rate hikes by the Federal Reserve System (Fed).
According to the U.S. Census Bureau on the 16th local time, retail sales in August totaled $773.9 billion, approximately 1,058 trillion won, up 1.2% from the previous month. The increase significantly exceeded the 0.8% forecast from market experts, including The Wall Street Journal. Sales rebounded from a 0.5% decline in July and rose 6.0% from the same month a year earlier.

The rebound was driven by household vehicle purchases and demand for back-to-school goods. Online sales, which account for a significant share of retail sales, surged 2.6%, while revenue at auto and parts dealers rose 0.6%. Discretionary spending categories, including appliances, also increased 1.6%.
Some experts said a base effect also played a role, as Amazon Prime Day, a major annual discount event, was moved forward from July to June this year, making July’s figures appear weaker. Gas-station sales also rose 3.1% from the previous month, up 21.0% from a year earlier, as oil prices climbed amid the fallout from the war against Iran. This contributed to the overall increase.
Of particular note was core retail sales, which serve as a key input for calculating gross domestic product (GDP) and exclude automobiles, gasoline, building materials, and food services. The measure jumped 1.4%, far exceeding the market forecast of 0.4%. This indicates that Americans’ underlying spending strength remains robust even after excluding oil-price fluctuations.

United States households continue to spend, supported by steady wage growth and rising stock prices despite high inflation and supply-chain pressures. According to Bank of America data, household credit- and debit-card spending increased 0.9% in August from the previous month. However, consumers also appeared to be becoming more cautious, drawing down accumulated savings and seeking cheaper products.
The strong consumption data is expected to bolster the Federal Reserve’s monetary-tightening efforts. With the labor market, which had been wavering throughout the summer, regaining stability and consumer spending remaining solid, financial markets are increasingly betting that the Federal Reserve will raise interest rates to curb inflation.
Bradley Saunders, North America economist at Capital Economics, said, "These figures reaffirm that the United States economy is well able to withstand higher interest rates. They give the Federal Reserve ample room to raise rates to bring inflation under control."
Meanwhile, with consumer spending supporting the United States economy, estimates for third-quarter U.S. economic growth have risen above the current annualized rate of 2.0%. That is higher than the 1.5% growth recorded in the second quarter.


[email protected] Park Ji-hyun Reporter