Online shopping increases retail sales in the US; the recovery of the labor market

WASHINGTON, Sept. 16 (Reuters) – U.S. retail sales rose unexpectedly in August as an increase in online shopping and furniture stores offset a continued decline in car dealerships, which could moderate expectations of a sharp slowdown in economic growth in the third quarter.

The surprise rebound in retail sales reported Thursday by the Commerce Department came as economists have been lowering their estimates of gross domestic product for the current quarter, citing declining motor vehicle sales, which are the result of a sharp shortage of inventories.

Sales last month were likely boosted by back-to-school purchases and government tax credit payments by the government.

“Consumer spending will continue to lead the economic recovery in the future,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania.

Retail sales rose 0.7% last month. July data was revised downwards to show that retail sales fell 1.8% instead of 1.1%, as previously reported. Economists surveyed by Reuters had predicted that retail sales would fall by 0.8%. Sales rose 15.1% from a year ago and are well above their pre-pandemic level.

They hold up, even as spending shifts from goods to services such as travel and entertainment, although rising COVID-19 infections are likely to delay the boom in spending on services. Retail sales are mostly merchandise, with services such as health, education, travel and hotel accommodation making up the remaining part of consumer spending.

Online retail sales rose 5.3% after falling 4.6% in July. Most school districts began their 2021-2022 academic year in August, and face-to-face learning resumed after last year’s shift to online classes due to the pandemic.

In mid-July, qualifying households began receiving money under the expanded child tax credit program, which will run through December. Sales at clothing stores rose 0.1% last month.

Sales at building materials stores increased 0.9% and revenue at furniture stores increased 3.7%.

But car dealership sales fell 3.6% after falling 4.6% in July. The global shortage of microchips, which is forcing carmakers to reduce production, is causing a shortage of inventory in showrooms.

The semiconductor crisis, which has been exacerbated by the latest wave of infections caused by the Delta variant of the coronavirus, mainly in Southeast Asia, is also causing a shortage of some electronic products. Congestion in China’s ports is also added to the bottlenecks of supply.

But revenue from sporting goods, hobbies, musical instruments and bookstores fell 2.7%. Sales at electronics and home appliance stores fell 3.1%, probably due to shortages.

Sales at restaurants and bars probably didn’t change, as rising coronavirus cases kept people at home. Restaurants and bars are the only category of services in the retail sales report.

Excluding cars, gasoline, building materials and food services, retail sales rebounded 2.5% last month after a revised downward decline of 1.9% in July.

These so-called basic retail sales correspond more closely to the consumer spending component of GDP. Previously, it was estimated that they had fallen by 1.0% in July.

US equities traded slightly lower. The dollar (.DXY) rose against a basket of currencies. U.S. Treasury prices fell.

CUT GROWTH ESTIMATES

Motor vehicle sales and corporate struggles to replenish stocks have caused economists to lower their GDP growth estimates for the third quarter.

On Wednesday, JPMorgan economists cut their third-quarter GDP growth forecast to an annualized rate of 5.0% from a rate of 7.0%. Goldman Sachs earlier this month reduced its estimate to a rate of 3.5% from a rate of 5.25%.

The slowed momentum was corroborated by last week’s Federal Reserve “Beige Book” report which showed that “economic growth slowed slightly at a moderate pace in early July through August.” The economy grew at a rate of 6.6% in the second quarter.

“We expect domestic demand to increase next quarter,” said Michael Feroli, JPMorgan’s chief U.S. economist in New York. “This means that the wind in the Delta is fading and the problems affecting the motor vehicle sector are gradually diminishing.”

Americans are saving at least $ 2 trillion in excess of accumulated savings during the pandemic. Wages rise as companies soar to cover a record 10.9 million jobs.

A separate report from the Department of Labor on Thursday showed that initial demands for state unemployment benefits were rising from 20,000 to 332,000 seasonally adjusted for the week ended 9/11. Economists had forecast 330,000 applications for the past week.

The claims were likely driven by Hurricane Ida, which devastated U.S. extraterrestrial energy production and wiped out energy in Louisiana. Ida, one of the most powerful hurricanes to hit the U.S. Gulf Coast, also wiped out Mississippi and caused historic flooding in New York and New Jersey.

Claims have fallen from a record 6.14 billion in early April 2020. A range of 200,000 to 250,000 is considered to coincide with healthy labor market conditions.

Report by Lucia Mutikani Edited by Chizu Nomiyama and Paul Simao

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