US Retail Sales Forecast to Slow in August

The monthly retail sales report, a barometer of consumer spending, is due to be released today.

Forecasts

Economists forecast that retail sales will moderate, after rising strongly in July. Retail sales are forecast to rise by 0.3% on the month, excluding autos. This follows a 1.0% increase in the previous month.

Headline retail sales are expected to rise by 0.3%, increasing at less than half of the pace of the rise in July.

The increase in retail sales comes after the data for July surprised to the upside. Consumers spent more at retail stores and restaurants. The report has been showing trends of underlying momentum that is increasing.

The consumer data comes at a time when various economic indicators are giving a mixed outlook. There is no doubt that the US economy is slowing. At the same time, there are concerns that the economy could be heading into a recession.

Even various measures of consumer confidence remain mixed. However, there are some indications that the retail sales report for August could beat the estimates, which remain a bit conservative once again.

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Retail Sales Could Get a Bump from Auto Sales

Total deliveries rose 7% in the month of August.

The bump in the auto sales came on account of the early Labor Day weekend. Auto sales have been steadily improving throughout the year. The increase matches that of the same pace of increase in auto sales seen the year before.

In August, auto sales by volume rose 0.9% on a seasonally adjusted basis.

Monthly auto sales fell in the first six months of the year. On a year over year basis, yearly retail sales are down an estimated 1.9% through July. The long Labor Day weekend is traditionally a big weekend for auto sales at US dealerships.

However, some concerns remain with the big three automakers from Detroit reporting auto sales on a quarterly basis. Meanwhile, the rest of the automakers report the figures on a monthly basis.

US retail sales could see a modest pick-up with the actual data likely to come slightly above expectations. This is based on the fact that US household finances increased strongly. At the same time, lower costs of financing have helped to keep retail sales steady.

Consumer Confidence Remains Mixed

The Fed’s rate cut in July, along with expectations of further rate cuts, could continue to support household income. Despite the positive scenario, the uncertainty due to global trade remains a headwind.

In August, there were some declines in consumer confidence. The report from the University of Michigan showed that consumer sentiment was the lowest since 2012. But, on the contrary, consumer confidence rose to the highest level since 2000.

The consumer sentiment index fell by 8.6 points in August. This was the biggest monthly decline in the index since December 2012. The report underlined that the declines were due to the trade fears and escalation in tariffs.

While the UoM’s reading on consumer sentiment was a tad negative, it was a different story from the Conference Board. The Conference Board’s consumer sentiment report gave a more optimistic outlook.

Overall, expect the August retail sales report to once again come up better than the average estimates.

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