Consumers increased their spending levels in August, according to the latest Census data. Retail sales rose 0.9 percent in August, building on the 0.6 percent jump in July. This was the second consecutive month of higher spending following three months of declines. This is good news, but the increase was largely driven by gasoline station sales, which were up 5.5 percent on mostly higher petroleum prices. If you exclude gasoline from retail sales figures, the increase in August shrinks to 0.3 percent.
The second largest driver of growth in retail sales last month was in the motor vehicle and parts sector, up 1.3 percent. This follows a few months of relative weakness in auto industry sales, with August’s growth rate the fastest since February. Excluding autos and gasoline, retail sales grew just 0.1 percent, suggesting the broader consumer market was weaker in August than the strong headline number might suggest.
Aside from autos and gasoline, areas of strength for retail spending included building materials (up 1 percent), food and drinking places (up 0.5 percent), and furniture and home furnishings (up 0.3 percent). Declining sectors were electronics and appliances (down 1.4 percent), general merchandisers (down 0.3 percent), and clothing and accessories (down 0.1 percent). Several components reflected unchanged spending from July, including food and beverages, sporting goods, and nonstore retailers.
These numbers suggest that aside from autos and gasoline, overall consumer spending was up only modestly. With that said, other data out today suggests that consumers have become more confident in the last month.
The University of Michigan and Thomson Reuters said that its consumer sentiment index rose from 74.3 in August to 79.2 in September. This is the highest level of optimism since May, with recent weaknesses weighing the index lower in the summer months. Nonetheless, respondents had better expectations regarding future conditions, which helped to move the index higher in September. This does stand in contrast to other variables which indicate rising anxieties, including the most recent consumer survey from the Conference Board.
With that said, even with this month’s improvement in consumer perceptions, the overall index remains well below where it should. Optimism has remained suppressed in the University of Michigan and other sentiment surveys of consumers since prior to the 2007-2009 recession.
Chad Moutray is chief economist, National Association of Manufacturers.