US Retail Sales Rise 0.1% in August, Nonstore Retailers Up 7.8%, Fed Rate Cut Expected

U.S. Retail Sales Show Modest Growth in August

U.S. retail sales data for August 2024 came in stronger than expected, giving a slight boost to market sentiment. Despite concerns about a potential slowdown in consumer spending, retail sales showed resilience, reflecting steady economic activity.

August Retail Sales Increase by 0.1%

According to the Census Bureau, advance estimates for U.S. retail and food services sales in August reached $710.8 billion, marking a 0.1% increase from July 2024. This modest rise exceeded expectations, as economists had forecasted a 0.2% decline in spending. The year-over-year growth was also positive, with sales up by 2.1% compared to August 2023. Total sales for the June-August period were up 2.3% from the same time last year, indicating stable consumer demand.

July’s retail sales were also revised upward, from a previously reported 1.0% increase to 1.1%, providing additional momentum to the retail sector.

Core Retail Sales Show Positive Growth

Excluding auto and gas sales, retail sales rose by 0.2% in August, though this was slightly below the consensus estimate of a 0.3% increase. The control group, which strips out more volatile categories and factors into the GDP calculation, grew by 0.3%, meeting market expectations. These figures suggest that the core components of retail spending remain healthy, contributing positively to overall economic growth.

Nonstore Retailers Lead Growth

Among the key segments, nonstore retailers, including e-commerce platforms, showed the strongest year-over-year growth, with an impressive 7.8% increase. Meanwhile, food services and drinking places rose by 2.7% from August 2023, signaling sustained consumer spending in the service sector.

Retail trade sales, which exclude food services, rose by 0.1% from July and 2.0% from the previous year, indicating steady demand across the broader retail market.

Fed Rate Cut Expectations Rise

The stronger-than-expected retail sales report comes at a critical time as the Federal Reserve begins its two-day policy meeting. Markets are pricing in a 67% probability of a 50 basis point rate cut, driven by signs of slowing labor market activity and easing inflation. This would be the first rate cut since 2020, with traders anticipating the Fed’s decision to be announced on Wednesday.

The better-than-expected retail sales data could influence the Fed’s decision, as robust consumer spending often mitigates the need for aggressive monetary easing. However, with inflation nearing the Fed’s 2% target, a rate cut seems likely to stimulate economic activity.

Market Forecast: Cautious Optimism

Given the slight increase in retail sales and ongoing strength in key sectors like nonstore retailers, the market outlook remains cautiously optimistic. While consumer spending has not surged, it remains steady, supporting a bullish stance in the short term. However, traders should closely monitor the Fed’s upcoming decision, as a larger-than-expected rate cut could further boost market sentiment.