August retail data feed a tempered optimism
WASHINGTON - Hopes for an economic recovery drew support yesterday from retail sales figures that topped expectations. But weak results from two major stores sent a more sobering message: Americans probably aren’t ready to spend robustly again.
Auto sales soared in August, partly because of Cash for Clunkers government rebates. Even apart from autos, sales gains came in ahead of what analysts were looking for.
But lackluster sales reports from Best Buy and Kroger signaled that shoppers remain wary. And with the job market still weak, wages flat, and credit tight, economists warned that last month’s gains could be short-lived.
The Commerce Department reported that retail sales rose a seasonally adjusted 2.7 percent last month after falling 0.2 percent in July. That’s the largest gain since January 2006 and easily beat analysts’ expectations.
While the figures were welcome, “we need more data to see if this is sustainable or just noise,’’ Ian Shepherdson, chief US economist at High Frequency Economics, wrote in a research note. “The income and credit constraints on consumers remain intense.’’
Auto sales were up 10.6 percent, the biggest gain in almost eight years, mainly because of the recently ended clunkers program. Gasoline sales increased 5.1 percent, as prices at the pump rose. Excluding those two categories, sales rose 0.6 percent, the most in six months.
“That’s a pretty good rate - if it was sustained,’’ said Brian Bethune, chief US financial economist at IHS Global Insight.
Consumer spending accounts for about 70 percent of the nation’s economy. Analysts note that Americans are saving more even as their incomes stay flat. If they don’t consistently spend more, the economic recovery could weaken next year.
Bethune said retail sales last month were helped by tax holidays in several large states, including California, Texas, and Florida, and school openings were delayed in some places because of budget constraints. Both factors probably pushed some back-to-school sales from July into August, giving August sales a lift, he said.
With government incentives no longer available, auto sales will probably fall in coming months. Bethune called it “the hangover from Cash for Clunkers.’’ He expects consumer spending to rise 2.5 percent this quarter, then slip later this year.
A report from the Labor Department, meanwhile, signaled that the still-weak economy is keeping inflation in check. Wholesale prices rose 1.7 percent in August, more than double what economists expected.