- Spending at US retailers and restaurants unexpectedly rose in August to $US618.7 ($AU843) billion, the Census Bureau said.
- The 0.7% jump trounced the average economist estimate of a 0.8% decline.
- The spending surge came amid soaring Delta cases, the renewal of some restrictions, and weak hiring.
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Spending at US retailers unexpectedly rebounded in August despite soaring COVID cases and the reinstatement of some economic restrictions.
Retail sales gained 0.7% last month to $US618.7 ($AU843) billion, the Census Bureau announced Thursday morning. Economists surveyed by Bloomberg expected sales to drop by 0.8% through the month.
The print offsets some of the decline seen in July. That month’s sales were revised to $US614.3 ($AU837) billion from $US617.7 ($AU841) billion.
While sales are still well below their April peak of $US629 ($AU857) billion, they remain above trend and significantly higher than pre-COVID levels. Consumer spending counts for roughly 70% of economic activity, and during a recession characterized by lockdowns and business restrictions, a resumption of typical spending activity is critical to reviving the broader economy.
"Consumers have continued to spend robustly even after the stimulus sugar-high has worn off," Ted Rossman, senior industry analyst at Bankrate, said. "That's a good sign for the economy. Rising COVID cases did not seem to have much of an effect on retail sales in August."
Spending soared the most at nonstore retailers - which include e-commerce websites and pop-up stands - as such businesses enjoyed a 5.3% gain. Furniture stores saw a 3.7% jump in sales and merchandise retailers followed with a 3.5% increase.
Other sectors continued to see sales slide through the virus resurgence. Spending at electronics and appliance stores slid 3.1% in August, while sales at vehicle dealers and parts stores dropped 3.6%. Sales were flat in restaurants and bars, suggesting the renewal of some mask-wearing rules did little to dent Americans' return to dining out.
Tracking the not-so-fragile recovery
The Thursday sales data offers a more promising view of the US rebound than several bleaker developments recently.
For one, it shows spending on the rise despite a sharp slowing in the labor market's recovery. The US economy added just 235,000 jobs in August, less than a third of the growth expected and the smallest monthly increase since January. It also marked a significant deceleration from job growth in the month prior, when the country added 1.1 million payrolls.
Measures of Americans' confidence were similarly harsh last month. The University of Michigan's consumer sentiment index plummeted to 70.3 in August, its lowest level since 2011 and the largest one-month drop since the start of the pandemic.
The latest retail sales data reflects that, despite soured confidence in the recovery, Americans still went out and spent, although obstacles remain in the way of sustained sales growth. For one, virus cases have only climbed higher in September, and while economic restrictions haven't changed, daily case counts now surpass those seen during the dire winter wave.
Supply-chain issues also risk hobbling the recovery. Holiday season spending could bring a healthy boost to economic activity, but shortages and shipping bottlenecks could limit just how much supply can meet Americans' massive demand. Early signs are encouraging, and the August report signals businesses can bet on people still wanting to spend, Ian Shepherdson, chief economist at Pantheon Macroeconomics, said.
"Inventory now appears to have stabilized so sales likely won't keep falling at their recent pace, but we can't be sure August marks the bottom," he said. "Upside surprises on this scale don't come often, and this one indicates a real degree of resilience on the part of consumers."