Retail Sales Rise 0.6% in August, Exceeding Expectations
The Census Bureau's Advance Retail Sales Report for August revealed a 0.6% increase in headline sales compared to July, marking the fifth consecutive month consumer spending has increased. The latest figure surpassed expectations of 0.2% monthly growth.
Here is the introduction from today's report:
Advance estimates of U.S. retail and food services sales for August 2023, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $697.6 billion, up 0.6 percent (±0.5 percent) from the previous month, and up 2.5 percent (±0.7 percent) above August 2022. Total sales for the June 2023 through August 2023 period were up 2.2 percent (±0.4 percent) from the same period a year ago. The June 2023 to July 2023 percent change was revised from up 0.7 percent (±0.5 percent) to up 0.5 percent (±0.2 percent).
Retail trade sales were up 0.6 percent (±0.5 percent) from July 2023, and up 1.6 percent (±0.5 percent) above last year. Gasoline stations were down 10.3 percent (±1.1 percent) from last year, while food services and drinking places were up 8.5 percent (±2.3 percent) from August 2022.
The chart below is a log-scale snapshot of retail sales since the early 1990s. The three exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator. The red line is a linear regression through the complete data series. The green line is a regression from the start of the series through the end of 2007 and then extrapolated to the present - thus excluding the Financial Crisis. The blue line is a regression from the start of the series through the end of 2019 and then extrapolated to the present - thus excluding the COVID-19 pandemic. Monthly retail sales have been above the red and blue line since March 2021, signaling increased consumer spending that was most likely pent up as a result of the pandemic.
The year-over-year percent change provides another perspective on the historical trend. Current retail sales are up 2.5% compared to this time last year. Here is the headline series with a callout to the most recent 12 months.
Core Retail Sales
Core sales (ex Autos) also exceeded expectations by registering 0.6% growth in August, defying the forecasted 0.2% increase. Core retail sales are up 2.0% compared to August 2022. Here is the year-over-year chart of core retail sales with a callout to the most recent 12 months.
Retail Sales: “Control” Purchases
The next two charts illustrate retail sales “control” purchases, which is an even more “core” view of retail sales. This series excludes motor vehicles & parts, gasoline, building materials as well as food services & drinking places. The popular financial press typically ignores this series, but it's a more consistent and reliable reading of the economy. Retail sales control purchases increased 0.1% in August.
Similar to the retail sales snapshot chart earlier, the chart below is a log-scale snapshot of control purchases since the early 1990s and includes two of the exponential regressions previously mentioned.
Here is the same series year-over-year. Current control purchases are up 3.5% compared to one year ago.
For a better sense of the reduced volatility of the “control” series, here is a YoY overlay with the headline retail sales. Note that the two series follow each other closely, but headline sales have more extreme highs and lows than the control series.
Bottom Line: Retail sales rose more than expected in August as consumers spending picked up for a fifth straight month.
For an inflation-adjusted perspective on retail sales, take a look at our Real Retail Sales commentary.
This article was originally written by Doug Short. From 2016-2022, it was improved upon and updated by Jill Mislinski. Starting in January 2023, AP Charts pages will be maintained by Jennifer Nash at VettaFi | Advisor Perspectives
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