The summer sales turned pretty

Summary

Retail sales shot up 0.6% in August, buoyed in part by prices but also by an unexpectedly brisk pace of sales at auto dealers and especially online shopping which posted a 2.0% gain during the key back-to-school month.

August rush

Retail sales shot up 0.6% in August, an out-turn that handily exceeded the 0.2% increase expected by the consensus forecast. There were a few surprises in the underlying details and some reasons to take the brisk pace of spending with a grain of salt; but the bottom line is that consumer spending remains resilient in the face of tariffs and a softening labor market.

Retail sales are reported nominally or not adjusted for inflation. Consumer goods prices rose 0.5% in August, and 0.3% when excluding food and energy, suggesting a big part of the gain in sales actually stems from consumers paying higher prices rather than buying more goods last month. Adjusting for these price effects we estimate "real" retail sales rose more like 0.2% in August, which is still good but not as strong as the nominal figures imply.

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