Economic Report: Retail sales grow by smallest amount in six months, but spending primed to rebound

Economic Report: Retail sales grow by smallest amount in six months, but spending primed to rebound

Sales at U.S. retailers hit a soft patch in August after a big July, but households still have plenty of money to spend.

The numbers: U.S. retailers posted the weakest sales in August in six months and only an increase in purchases at gas stations prevented an outright decline, but the soft patch in spending is unlikely to last.

Retail sales rose a scant 0.1% in August, the government said Friday. Economists polled by MarketWatch had forecast a 0.3% increase.

The numbers would have been even worse if not for a 1.7% spike in spending at gas stations. Retail sales omitting car fuel fell 0.1%.

One saving grace in an otherwise drab report was a sunnier look at what consumers spent in July. Retail sales were raised to show a 0.7% increase instead of 0.5%.

What happened: Receipts fell 0.8% at auto dealers and that weighed heavily on the overall sales since they account for about 20% of all retail spending.

Sales also fell at department stores and outlets that sell clothes and home furnishings.

Aside from gas stations, Internet retailers were the only other standouts. Sales rose 0.7% as they continued to make inroads against traditional brick-and-mortar stores.

Even after the slowdown in August, retail sales are still growing rapidly. They’ve climbed a healthy 6.6% in the past 12 months.

Also Read: Americans eat out more because of the strong economy – and pay a premium

Big picture: The slowdown in retail sales in August is almost certainly a blip.

The U.S. economy is entering the fall with a heady dose of momentum. Strong hiring, low unemployment and rising incomes — not to mention the Trump tax cuts — have given Americans plenty of money to spend.

Households are also in good shape. The savings rate is fairly high at almost 7%, for one thing. And the amount of money Americans owe relative to what they earn is still near a 20-year low despite nine years of economic expansion.

Read: Americans owe more money than ever, but no, they are not being crushed by debt

Market reaction: The Dow Jones Industrial Average DJIA, +0.57% and the S&P 500 SPX, +0.53% were set to open higher in Friday trades. The stock market has forged ahead in the past few days after a shaky start to the month and is not far from record highs.

The 10-year Treasury yield TMUBMUSD10Y, +0.68% stood at 2.99% and is flirting with 3% for the first time since June.

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