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September 13, 2019 Blog 1 min read
Even as the economy has slowed this year, consumers have remained a relative bright spot….still confident and, importantly, still spending.

9-13-19 Retail Sales

Retail sales rose by 0.4% in August, easily beating expectations of a 0.2% increase from the prior month. Excluding vehicle sales and gas, sales yielded a pedestrian 0.1% increase. Over the past year, retail sales rose 4.1%. After an exceptionally strong reading in July, sales growth slowed markedly in the past month, but still came in at a solid clip that is consistent with moderate economic growth.

From a broad perspective, the report provides another reassuring note that the economy may have slowed, but it hasn’t fallen of a cliff. The consumer engine is still running strong.

Strong labor market conditions and continued wage gains have helped to sustain consumer confidence and support spending. In addition, consumer savings rates remain near cycle highs and debt service ratios remain near multi-decade lows, indicating that household budgets are generally in good shape. This bodes well for an economy driven largely by consumer spending.

The underlying data tells a mixed story, as retailers didn’t all participate to the same degree. A surge in auto sales (up 1.8%) provided a sizable lift, as did spending on building supplies. Consumers’ willingness to spend on big ticket items illustrates a high degree of confidence on the part of the consumer sector.

Beyond that, the report again illustrates the changing nature of consumer spending habits. Nonstore retailers – dominated by online commerce – grew at a brisk 1.6% pace. Over the past year, the sector's growth of 16% easily leads the retail sector. That continues to come at a price for traditional bricks-and-mortar stores, who attempt to adapt to changing consumer habits and the impact of technology on commerce. Department stores remain the most notable laggard, with sales down over 5% in the past year. Beyond that, many specialty retailers in the apparel, sporting goods, and other goods that are easily purchased online are feeling the pinch.

After a spate of bad news and rising fears about the near-term outlook, recent economic data has been reassuring. Downside risks have clearly risen in recent months, and both the slowing global economy and the cloudy trade policy outlook remain significant sources of uncertainty. For now, consumers are unquestionably the primary driver for the economy. The good news? They appear to be well positioned and willing to carry that load.

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