Why Can’t Experts Agree On August Retail Sales Results?

Hot off the presses this week were the newest retail sales figures from the U.S. Commerce Department. At first glance the hard numbers might not have seemed all that remarkable, as the sales numbers moved modestly but not shockingly.

Some of that was predicated on record low gas prices — gas sales are calculated on the dollar amount of sales, not volume of fuel purchased, so low gas prices are something of a drag on retail sales.

“[The] retail sales report was OK, but not great. Outside of gasoline, consumer spending is rising thanks to solid job gains, modest job growth and pent-up demand,” Stuart Hoffman, senior vice president and chief economist at The PNC Financial Services Group, wrote in a research note Tuesday (Sept. 15).

Not all the opinions offered on the report were so neutral. One particular Barclay’s analyst described the results as proof that consumers are “buoyant,” while another less enthusiastic retail watcher was quick to call upbeat responses to the results “delusional.

What’s the real scoop in the retail realm? Your quick guide is here.

By The Numbers

According to Commerce Department figures, retail sales, which includes commerce as sales at shops and restaurants managed to grow – albeit slight, posting a 0.2 percent monthly gain in August and a 2.2 percent annual increase. The small increase in August follows a 0.7 percent increase in July.

Of 13 categories surveyed, 10 saw an uptick in sales – with auto dealers and restaurants continuing their 2015 hot streak.

Auto-dealers continued to show strength in August with a 0.7 percent increase, bringing the 12-month average to 5.7 percent. Restaurants also saw sales tick up by 0.7 percent in August, bringing their 12-month increases to 8.2 percent.

Also experiencing sales growth last month were grocers, clothing stores, sporting goods retailers, electronics outlets and online retailers.

August 2015 was also the sixth consecutive month of retail sales growth in the U.S. – despite gas prices that, on average nationwide, according to The Wall Street Journal, fell by 15 cents per gallon at the pump, depressing gas sales by 1.8 percent.

If gas is subtracted from the equation, retail sales rose 0.4 percent in August and 4.4 percent over the year.

Calm Consumers, Happy Analysts

“The trend is strong and robust,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics USA in New York, who forecast the sales trends. Daco told Bloomberg the latest results demonstrate the consumer economy is “resistant to outside shocks, and that’s quite important at this point in time.”

Quite important indeed, especially after weeks of market turmoil and concerns that a contracting Chinese economy was about to take the world markets with it. Consumers — perhaps feeling more confident as hiring numbers continue to climb — seemed to carry on with spending.

Jesse Hurwitz, a U.S. economist at Barclay’s, was so cheered by the results that he raised the firm’s estimate of third-quarter growth to a 2.4 percent annual rate from 2.2 percent.

“We expect the consumer to remain the dominant force behind U.S. economic growth,” he wrote in a note to clients.

chartretailsales1And Hurwitz was not the only one revising his Q3 figures. In the aftermath of the Commerce Department’s findings, Morgan Stanley and JPMC also adjusted their estimates upward.

More than the increase, analysts were happy to see the relative areas in strength — particularly restaurants, as it indicates consumers are a bit more willing than they’ve been in recent memory to “splurge.”

“There was more spending on ‘wants’ last month,” such as eating out, sporting goods and electronics, Jennifer Lee, a senior economist at BMO Capital Markets told The AP. “These are areas that suggest consumers are ready and willing to splurge a little on items outside of the basic necessities.”

Jeerleaders And Manufacturing Woes

“There may be a planet where a sales performance like August’s could be described as a “surge” — but it’s not planet Earth,” blogger Tom Blumer noted of the results.

And while Blumer was more critical of the newest batch of results, he was not the only one with concerns.

Though the market did growth for a sixth consecutive month, that growth missed analyst predictions on the year.

Back-to-school shopping also seems to have come and gone with a less noticeable bump to retail such that U.S. News And World Report drew an opposite conclusion: that perhaps consumers, somewhat rattled by the market’s roller coaster ride this summer, are not feeling quite so free to spend as forecast.

Manufacturers’ continued struggles also have netted some attention.

Manufacturing declined more than expected in August, 0.5 percent, the most since January 2014. Even retail manufacturestripping out automakers doesn’t do much to solve the problem — as even stripping out auto production just leaves the numbers flat.

Moreover, going into Q4, most analysts expect the headwinds faced – weak overseas economies supercharging the value of the dollar and a huge inventory build-up through the first half of the year.

Though the Commerce Department’s data indicates that backlog of inventory may soon be starting to move, there is debulking to be done still.

So what is the great takeaway from the most recent retail sales figures? They’re not world record beaters — but indicative that the economy, for now at least, is rolling along well enough to keep consumers shopping.


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