Dive Brief:
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Retail sales grew 0.2% in August, a 2.2% annual increase, and the sixth month of stability or growth, the Commerce Department said Tuesday. Retail sales excluding autos, gasoline, building materials, and food services increased 0.4% and that number for July was revised up to 0.6% from 0.3%.
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Economists, many who expected a 0.3% rise, nevertheless hailed the numbers as positive for the economy, despite manufacturing headwinds coming from low oil prices and a strong dollar. Those factors are likely boosting Americans’ spending, though, which could be enough to shelter the economy from global financial stumbles.
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Sales at apparel stores rose 0.4%, sporting goods and hobby stores sales rose 0.3%, and electronics and appliance sales rose 0.2%. Sales at building materials and garden equipment stores fell 1.8% and sales at furniture stores fell 0.9%. E-commerce sales also rose, according to the report.
Dive Insight:
There are all kinds of reasons this report is especially highly anticipated, beyond the usual consideration that the U.S. economy is dependent on retail spending: Many have wondered how the recent stumbles in the financial markets that shook the globe, especially in China, would affect the U.S.; many are also wondering if the Federal Reserve will raise interest rates this week; and retailers, of course, are now gearing up for the holidays.
The report isn’t wildly wonderful— it’s pretty much in line with economists’ expectations. But because gas prices have stayed low, consumers are finally considering that something of a windfall rather than waiting for them to go back up. And an improving job market and rising, if slowly rising, wages are undergirding spending confidence, economists say.
Of course, retailers should hardly feel complacent. In fact, says Dan Wagner, founder-CEO of Powa Technologies, retailers still have much work to do to capture the attention of the U.S. consumer (beyond discounts).
“Retailers must not rest on their laurels on this positive sales report,” Wagner said in an email to Retail Dive. “This data should not be interpreted as a reason for retailers to refrain from aggressively implementing a truly multi-channel retail strategy. There continues to be a fundamental shift in consumer spending patterns, where the online and physical worlds are seamlessly integrated which requires a comprehensive mobile strategy.”
Indeed, while encouraging for retailers and economists, the spending report is probably not strong enough to be a major factor leading the Fed to increase the interest rate. While earlier this year the Fed was widely seen as likely to boost the rate, recent financial volatility in global markets is also widely seen as tempering that probability.
That's good news for retailers. A rate increase would mean mortgage rates and other loans would be more expensive, and is seen as having at least somewhat of a dampening effect on spending by business and consumers.