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US retail sales defy expectations with rebound in August

US retail updates

US retail sales bounced back in August as shoppers stocked up on school supplies and home decor in a sign of their willingness to spend.

Sales were up 0.7 per cent compared with the previous month, the Census Bureau said on Thursday. The increase bucked analysts’ expectations for a 0.8 per cent decline, after a resurgence of coronavirus and rising prices appeared to dampen consumer confidence. In July, sales fell 1.8 per cent, compared with an initial estimate of a 1.1 per cent drop.

Demand at department stores and home improvement and furniture outlets, as well as stronger spending online, helped drive the increase in August sales. Grocery stores also registered gains, a sign of resilient demand for food consumed at home. Sales in the food services category, which includes bars and restaurants, were flat.

Car dealers and electronics stores — two sectors pressured by a shortage of computer chips — posted weaker sales.

Analysts at Oxford Economics noted that supply chain issues and the spread of the Delta coronavirus variant have influenced spending patterns. While consumers spent big on ecommerce orders and home furnishings, they also “exercised more caution in terms of dining out and held back on purchases of goods that have become costlier and harder to come by such as cars and electronics”.

Consumers have reported feeling much less optimistic about the economy and their own finances last month in a University of Michigan survey, which characterised the findings as a “stunning loss of confidence” in response to an increase in coronavirus cases. Consumers are navigating a period of higher prices as well. Inflation in August hovered near a 13-year high, although month-to-month price gains have eased.

But economists have noted that overall spending remains strong, aided by elevated levels of consumer savings and a labour market recovery.

Retail sales including food services remain well above pre-pandemic levels. Major retail chains including Walmart, Target and Home Depot booked robust quarterly revenues in the early part of summer, bolstered by back-to-school shopping and homeowners taking up new projects.

Consumers also have allocated some of their spending to experiences not captured by retail sales data, allocating more on things such as travel, accommodation and tickets to concerts and sporting events now that many coronavirus restrictions have been lifted.

Yields on both short- and longer-dated US Treasury bonds rose to session highs immediately following the data release. The benchmark 10-year yield, which moves in step with economic expectations, was up by 0.05 percentage point to 1.35 per cent.

Shorter-dated yields, which move with interest rate expectations, also rose as investors increased bets that the Federal Reserve may take the first step towards unwinding its pandemic-era monetary policy at its meeting next week.

On Wall Street, the blue-chip S&P 500, the tech-focused Nasdaq and the Dow Jones Industrial Average all fell. Though the retail sales data bolstered some areas of the market, those gains were offset by weakness in the technology sector.


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