American spending at retailers increased by a modest 0.1% last month, buoying the economy amidst Federal Reserve discussions on interest rate adjustments.
Noteworthy sales increases were reported by online retailers, sporting goods stores, and home and garden stores, indicating continued consumer willingness to spend despite inflation.
The big picture: Factors such as rising average paychecks, particularly for lower-income individuals, alongside a decrease in inflation to a three-year low of 2.5%, have supported consumer spending.
- Concerns over the economy, including hiring slowdowns and rising unemployment rates, were alleviated by steady consumer spending. The Federal Reserve’s Atlanta branch estimated a solid 2.5% annual economic growth rate in the third quarter.
- Expectations suggest that the Federal Reserve will reduce its key interest rate in upcoming meetings to lower borrowing costs and potentially impact mortgage rates, auto loans, and credit cards.
Driving the news: Consumer adaptation to economic pressures was evident in trends such as rising credit card debt and falling savings rates, which could influence future spending habits.
- Notable shifts in consumer behavior included increased online shopping, particularly for lower-priced items, and a rise in shopping at discount retailers in response to inflation.
- Despite positive retail sales in August, some sectors like restaurants and bars experienced flat sales, hinting at cautious consumer spending in certain discretionary areas.
- Gas stations saw a 1.2% sales decline, largely due to decreasing prices, while auto sales slightly decreased during this period.
