US Retail Sales Rise 0.1% in August, Nonstore Retailers Up 7.8%, Fed Rate Cut Expected

July’s retail sales were also revised upward, from a previously reported 1.0% increase to 1.1%, providing additional momentum to the retail sector.

Core Retail Sales Show Positive Growth

Excluding auto and gas sales, retail sales rose by 0.2% in August, though this was slightly below the consensus estimate of a 0.3% increase. The control group, which strips out more volatile categories and factors into the GDP calculation, grew by 0.3%, meeting market expectations. These figures suggest that the core components of retail spending remain healthy, contributing positively to overall economic growth.

Nonstore Retailers Lead Growth

Among the key segments, nonstore retailers, including e-commerce platforms, showed the strongest year-over-year growth, with an impressive 7.8% increase. Meanwhile, food services and drinking places rose by 2.7% from August 2023, signaling sustained consumer spending in the service sector.

Retail trade sales, which exclude food services, rose by 0.1% from July and 2.0% from the previous year, indicating steady demand across the broader retail market.

Fed Rate Cut Expectations Rise

The stronger-than-expected retail sales report comes at a critical time as the Federal Reserve begins its two-day policy meeting. Markets are pricing in a 67% probability of a 50 basis point rate cut, driven by signs of slowing labor market activity and easing inflation. This would be the first rate cut since 2020, with traders anticipating the Fed’s decision to be announced on Wednesday.

The better-than-expected retail sales data could influence the Fed’s decision, as robust consumer spending often mitigates the need for aggressive monetary easing. However, with inflation nearing the Fed’s 2% target, a rate cut seems likely to stimulate economic activity.