U.S. retail sales rose less than expected in August according to a report from the Commerce Department on Friday, signaling that a major part of the economy is slowing in the second half of the year. Retail sales account for nearly one-third of all consumer spending, so they are closely monitored as a proxy of economic growth.
The U.S. Census Bureau said that retail and food services sales for August increased 0.2 percent from July to $426.6 billion, marking the smallest gain in the last four months. Economists were expecting a 0.5-percent improvement month-over-month in the headline figure. On the bright side, retail sales have increased for five consecutive months. Compared to last August, retail sales were ahead by 4.7 percent.
July’s figure was upwardly revised from an original estimate of 0.2 percent growth to 0.4 percent expansion.
Eight of the 13 major categories showed improvement from July to August. On an adjusted basis, people spent more on motor vehicle and parts dealers, furniture and home furnishings and items at electronics and appliance stores, to name a few. Sales of building materials and garden equipment, clothing and accessories, sporting goods and items at gas stations and general merchandise stores slipped for the month.
Compared to August 2012, receipts at auto dealerships were up 10.1 percent. From July, sales rose about 1 percent to $75.07 billion, reversing course from a 0.5-percent drop from June to July.
So-called “core” retail sales, which don’t include autos, gasoline or building materials, rose 0.2 percent in August from July, in line with expectations. In July, core sales were up 0.5 percent. Core sales are part of the formulation for gross domestic product.
The slow month is indicative of Americans being conservative with their spending amid a still soft labor market, little pay increases and higher payroll taxes. The report is the latest piece of evidence that the Federal Reserve will mull over during its meeting next week that is expected to end with an announcement that the main bank is going to begin slowing its stimulus package that has been in place to spark the economy and keep interest rates extremely low.
In a separate report from Washington on Friday, the Labor Department said that the Producer Price Index, prices paid to factories, farms and refineries, increased by 0.3 percent in August after a flat month prior. Economist called for a 0.2-percent increase. “Core” PPI, which strips out the volatile food and energy categories, was unchanged in August from July, short of the 0.1-percent increase economists expected and snapping a string of nine straight months of gains. Compared to August 2012, PPI was up 1.4 percent, representing the smallest year-over-year rise since April.
That’s plenty of information for the Fed to chew on, but most analysts believe that soft data is not going to stop them from beginning tapering. The only change is that instead of the Fed dropping its purchases of $85 billion each month in Treasuries and mortgage-backed securities to $60 billion – $65 billion, the consensus is that the purchases will likely now be trimmed to about $75 billion.
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