The United States retail sales grew dramatically in August. This was most probably due to child tax credit payments from the Federal Government and back-to-school shopping. This could limit the expectations for a sharp downturn in economic growth in this year's third quarter. The unexpected bounce back in United States retail sales defied lowered consumer confidence. The United States retail sales were due to an increase in online purchases. This offset a continued decrease at auto dealerships. But the sales the month earlier were much weaker than what had been predicted.
Experts have been downgrading their estimates of the gross domestic product for the current quarter. They are stating the reason for declining motor vehicle sales. This was due to a sharp shortage of inventory. The comeback of coronavirus infections due to the Delta variant of COVID-19 played a role. Chris Low, the chief economist at FHN Financial, said, "US consumption is not slowing as quickly as it appeared a month ago despite the fading stimulus, and the Delta variant did not much affect the industries feeding into retail sales. The economy continued to hum in August." The United States retail sales increased by 0.7% in August. The data for July was revised to show United States retail sales decreasing by 1.8% instead of 1.1% shown in the initial estimates.
Experts had said that the retail sales would decline by 0.8%. Contrastingly, the sales grew 15.1% from a year ago and are 17.7% above the pre-pandemic mark now. The United States retail sales advance holds up even when spending goes back from goods to services such as entertainment and travel. Retail sales are usually goods, with services such as hotel accommodation, travel, education, and healthcare making up consumer spending. The online retail sales also bounced back 5.3% after declining by 4.6% in July. Many school districts have started their academic session in August. The in-person learning resumed after the shift to online classes last year due to the pandemic.
The qualifying households in July started getting financial aid from the expanded child tax credit program. It will continue till December. The United States retail sales at clothing stores increased marginally by 0.1% in August. There was robust growth in receipts in furniture stores and building materials. The United States retail sales at auto dealerships decreased by 3.6% after falling 4.6% in the previous month. An ongoing international shortage of semiconductors is causing many automakers to decrease their production. The latest wave of the coronavirus has worsened the microchip shortage. This is leading to shortages of many electronic goods also.
There is also some congestion at ports in China. The sales at appliance and electronic stores decreased by 3.1%. There was a decline in receipts at bookstores, musical instruments, hobbies, and sporting goods. The flow of traffic to bars and restaurants has also fallen due to the increase in coronavirus infections. Bars and restaurants are the only businesses in the services category in the United States retail sales report. The United States retail sales increased by 2.5% in August after a downward trend of 1.9% in July. This figure excludes food services, building materials, gasoline, and automobiles. These core retail sales correspond to the consumer spending component of the gross domestic product. They were previously forecasted to have decreased 1.0% in July. The shares on Wall Street were trading lower. The dollar increased against a basket of currencies. The US Treasury prices also decreased.
Accessory and clothing stores had an increase of 0.1% in the month. The sales increased by 38.8% after adjusting year-over-year. The department store sales increased by 2.4%. Book stores, musical instruments, hobbies, and sporting goods saw a decline of 2.7% month-over-month. Online and other non-store sales grew by 5.3% in the previous month and increased by 7.5% since the previous year. Personal care and health stores, such as drug stores, grew 0.2% in the month and 9.4% growth year-over-year. Garden supply and building stores had a month-over-month growth of 0.9% and a 6.3% yearly growth.
Bar and restaurant sales saw no monthly change. But the sales increased by 31.9% from this time the previous year. Beverage and food stores increased by 1.8% month-over-month and 5.7% adjusted year-over-year. Car and parts dealers experienced a growth in sales of 11.0% year-over-year and a decline of 3.9% month-over-month. Gas station sales increased by 0.2% in August and 35.7% in the past year.
The National Retail Federation stated that the increase in sales despite the headwinds had shown the continued robustness of the consumer and the resilience of the country's retailers. NRF President Matthew Shay said, "We maintain our confidence in the historical strength of consumers and fully expect a record year for retail sales and a strong holiday season for retailers." The nation is sitting on a minimum of $2.5 trillion in excess savings due to the pandemic. The wages are increasing as firms try to fill nearly 11 million job openings as soon as possible.
Another report from the Labor Department showed that the weekly jobless claims increased by 20,000 to an adjusted figure of 332,000 for the week ended September 11. Hurricane Ida increased these claims. It has damaged US offshore energy production and hampered electric power in Louisiana. The hurricane also flooded Mississippi and caused a lot of flooding in New Jersey and New York. The number of citizens who continue to get benefits after the first week of aid decreased by 187,000 to 2.665 million for the week ended September 4. This was the lowest mark since March of the previous year. The end of the federal government-funded unemployment benefits earlier in the month shows signs of boosting the labor pool. Conrad DeQuadros, the senior economic advisor at Brean Capital, said, "There is no evidence here that the surge in COVID cases related to the Delta variant is forcing a retrenchment in the economy."
Another report from the Philadelphia Federal Reserve shows that the business activity index increased to 30.7 in September from the level of 19.4 in August. Any reading above zero shows that there has been an increase in manufacturing activity in the region. This covers Delaware, southern New Jersey, and eastern Pennsylvania. Manufacturers said that there had been a moderation in input prices. This fits in with the latest data that suggests that inflation had peaked. They also increased the working hours for workers because of the labor shortage. The expectations have moderated, but the manufacturers are upbeat about business conditions over the coming half year.
Decreasing motor vehicle sales and struggles by firms to refill stocks have prompted experts to decrease their GDP growth estimates for this quarter. A report from the Commerce Department showed that the accumulation of inventory decreased in July. The experts at JPMorgan have decreased their third-quarter GDP growth forecast to an annualized rate of 5.0% from a pace of 7.0%. The Beige Book report of the Federal Reserve is showing "economic growth downshifted slightly to a moderate pace in early July through August."
After the United States retail sales report release, the experts at Morgan Stanley have increased their third-quarter GDP growth estimate from a 3.3% rate to a 5.0% pace. Goldman Sachs has increased its forecast from a 3.5% pace to a 4.5% rate. It had already lowered its pace of 5.25% earlier in the month. The US economy experienced a growth rate of 6.6% in the second quarter.
The US business inventory accumulation has slowed down in July. Motor vehicle retailers have struggled to refill their stocks due to an ongoing international microchip shortage. This is forcing vehicle manufacturers to scale back their production activities. The Commerce Department has also said that business inventories have increased again after an increase in June. These inventories are crucial for the gross domestic product. The increase in July was in line with the expectations of the experts.