U.S. retail sales declined in August, a cautious signal about consumers’ ability to remain the primary driver of economic growth this year.
Sales at retail stores, online and at restaurants fell 0.3% in August to a seasonally adjusted $456.32 billion last month, the Commerce Department said Thursday. It was the first decline in retail sales since March. Sales increased 0.1% in July, a small upward revision from an initial flat reading.
Excluding autos, retail sales last month fell 0.1%. Economists surveyed by The Wall Street Journal had expected overall sales would fall 0.1% in August, but rise 0.2% when excluding autos.
“Consumption is slowing in the current quarter which should diminish hopes of an above 3% rebound in overall growth,” said RSM chief economist Joseph Brusuelas.
A slowdown could challenge forecasts expecting gross domestic product to grow at a 3% pace in the second half of 2016 after expanding at a weak 1% pace through June. If consumer-spending growth slows, businesses and the government would need to step up outlays to realize the projected acceleration of the expansion.
Retail sales were up 1.9% in August from a year earlier, outpacing weak growth in consumer prices over the past year. But sales growth slowed from July’s annual increase of 2.4%.
Consumer spending has been the primary driver of growth so far this year, expanding at more than double the pace of the overall economy during the first half of 2016. Retail sales, a closely watched measure of consumer spending, showed strong gains this spring, before easing in recent months.
Solid, if slower, hiring this year and an unemployment rate below 5% is putting some upward pressure on wages. Higher earnings is one factor that had supported strong spending for most of this year.
“Stronger income growth should put consumers in a position to be able to spend more,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “But budget-conscious households appear content to balance their spending habits with a greater commitment to their long-term financial health.”
Excluding both autos and gasoline, sales were down 0.1% last month. Retail sales, however, largely don’t track spending on services, which accounts for two-thirds of consumer outlays. And the overall retail figure partially reflects the price of gasoline and automotive purchases, which don’t necessarily show underlying demand.
Sales at gas stations fell 0.8% in August and were down 9.5% from a year earlier. The average cost of a gallon of gasoline was down about 20 cents per gallon at the end of August from a year earlier. But Americans’ consumption of gasoline, by volume, reached arecord high earlier this year, according to the U.S. Energy Information Administration.
Consumers have tended to spend much of their savings at the pump since prices started to tumble. If prices remain low, that could easily fuel more spending on other goods and services in the coming months.
Sales at auto and parts dealers fell 0.9% in August, the largest decline for the category since March. Auto sales were up 1.4% from a year earlier.
Thursday’s report showed sales for nonstore retailers, a category that includes online merchants such as Amazon, fell 0.3% in August. That was the largest one-month decline since January 2015. The category is up 10.9% from a year earlier.
Department store sales fell 0.6% last month and sales at general merchandise stores were flat. Sales at building material and garden equipment stores fell 1.4%.
Sales at grocery stores rose 0.4% in August, and restaurant and bar sales rose 0.9%.
The strength of consumer demand is among the factors Federal Reserve officials are likely monitoring as they assess whether the economy is strong enough to support an increase in the central bank’s benchmark interest rate. The retail-sales report, and Friday’s consumer-price index report from the Labor Department, will be among the last major points of economic data Fed officials will see before meeting next week.