US retail sales in August rose 0.1% below expectations but previous month data was revised higher. According to analysts at Wells Fargo, there is legitimate weakness in auto sales, but aside from that consumer spending is still on track in Q3.
“Motor vehicle sales comprise roughly one fifth of all consumer spending in the retail sales report and this category has been a weak link in recent months, particularly here with this 0.8% decline in August. It marks the third straight monthly decline for autos.”
“While today’s report was broadly disappointing, there were significant upward revisions to prior data, which on balance suggest that consumer spending is still on track to be supportive of GDP growth in the third quarter.”
“The headline print of 0.1% was well short of the 0.4% that had been expected, but July’s initially reported 0.5% gain was bumped up to 0.7% in the revision. The revisions were even more pronounced for control group retail sales, which offer a better early read for the consumption figures in the GDP report. This category was also up just 0.1%, but the revision lifted the prior month’s increase to 0.8% from 0.5%.”
“The boost from tax cuts will eventually start to fade for consumers and this is occurring amid rising prices and only modest wage growth, at least for now. The silver lining to all that is that measures of consumer confidence still remain at or near levels last seen roughly 17 years ago. This gives us a degree of confidence in our forecast for solid consumer spending in the second half.”
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