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(Bloomberg) — US retail sales unexpectedly rose in August, supported by online purchases that masked more mixed results at other merchants.

The value of retail purchases, unadjusted for inflation, increased 0.1% after a revised 1.1% gain in July, Commerce Department data showed Tuesday. Excluding autos and gasoline stations, sales advanced for fourth month.

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Five of the report’s 13 categories posted increases, while others such as electronics and appliances, clothing and furniture fell. E-commerce merchants posted a solid 1.4% gain. Receipts at gasoline service stations decreased, reflecting cheaper prices at the pump.

The retail sales report showed so-called control-group sales — which are used to calculate gross domestic product — rose 0.3% in August. The measure excludes food services, auto dealers, building materials stores and gasoline stations.

Control-group sales rose at a robust 5.7% annualized pace in latest three months, the fastest rate since August 2023.

“The stronger-than-expected retail sales data for August suggest that, boosted by rapid wealth gains and falling energy prices, consumers continue to spend freely despite the labor market slowdown,” Olivia Cross, North America economist at Capital Economics, said in a note.

The figures indicate resilient household demand midway through the third quarter even as hiring and wage growth show signs of moderating. The report did little to settle the debate among economists as to how much Federal Reserve policymakers will lower interest rates on Wednesday.

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In addition to cooler job growth, economists forecast the combination of elevated borrowing costs, the depletion of pandemic savings and a higher cost of living will eventually prompt American consumers to cut back. 

Stock futures and the dollar remained higher and Treasury yields ticked up after the report.

Not only are the retail figures unadjusted for price changes, they also largely reflect purchases of goods, which comprise a relatively narrow share of overall consumer outlays. Data later this month will provide more details on August inflation-adjusted spending on goods and services.

What Bloomberg Economics Says…

“The details suggest consumers have grown more frugal, going online to search for deals and discounts on essentials and back-to-school items. With the savings rate falling to 2.9% in July amid a cooling labor market, consumers have little choice but to tighten their budgets — posing the risk of a broader slowdown and arguing for the larger FOMC cut this week.”

— Eliza Winger, economist

For the full note, click here

Spending at restaurants and bars, the only service-sector category in the retail report, were little changed last month.

—With assistance from Chris Middleton and Cécile Daurat.

(Adds graphic, economist’s comment)

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