Retail sales edged up by 0.1% from July to August, according to the Commerce Department.
This modest increase follows a larger surge last month, which marked the highest growth rate in retail sales in a year and a half.
The data suggests that Americans continue to spend more at retailers, offering a slight boost to the economy as the Federal Reserve weighs its next move on interest rate cuts.
Online retailers, sporting goods stores, and home and garden stores all reported stronger sales during the period.
Average wages, particularly for lower-income Americans, have risen significantly since the pandemic, allowing many to keep spending even as prices for necessities remain elevated.
Inflation, however, is showing signs of easing, hitting a three-year low of 2.5% last month.
Inflation and consumer spending have become focal points in the 2024 presidential race.
Former President Donald Trump has blamed the Biden-Harris administration for the post-pandemic spike in prices, while Vice President Kamala Harris has criticized Trump’s proposal to impose tariffs of 10% to 20% on all imports, calling it a “Trump tax” that would drive prices higher.
Though the unemployment rate has ticked up and hiring has slowed, consumer spending remains robust.
The Federal Reserve’s Atlanta branch estimates the U.S. economy grew by 2.5% in the third quarter.
“With consumption still very healthy, for now, recession fears appear overblown,” said Olivia Cross, North America economist at Capital Economics.
The Federal Reserve could further stimulate the economy by reducing borrowing costs.
Economists expect the Fed to cut its key interest rate in upcoming meetings, including a potential reduction on Wednesday.
Such cuts would lower interest rates on mortgages, auto loans, and credit cards over time.
Already, mortgage rates have begun to dip in anticipation of the Fed’s actions.
However, rising credit card debt and decreasing savings rates are signs that consumers are feeling financial pressure, which could slow spending in the coming months.
Kamie Meeks, a 22-year-old college student in New York City, said inflation has pushed her to seek out more affordable shopping options.
“It’s easier to find deals online,” she said, noting that she shops at discount retailers like Aldi, Walmart, and Chinese online platforms such as Shein and Temu.
Retail sales data for August shows a mixed picture.
Online retailers saw a 1.4% jump in sales, while health and personal care stores experienced a 0.7% increase.
However, spending at restaurants and bars remained flat, indicating that consumers may be pulling back on discretionary purchases.
Gas stations reported a 1.2% decline in sales, largely due to falling gas prices, and auto sales dipped slightly.
As the Fed meets to decide on a rate cut, Wall Street is betting on a half-point reduction from the current 5.3%, the highest level in 23 years.
Some policymakers may be hesitant to lower rates quickly, given inflation’s recent 2.5% reading.
However, many economists argue that with inflation heading toward the Fed’s 2% target, there is little need to maintain high rates.
One factor contributing to the decline in inflation has been consumers’ reluctance to pay higher prices for everyday goods.
Many shoppers have shifted to store brands, searched for deals, or turned to discount retailers.
In response, companies like Target, fast-food chains, and packaged food producers have reduced prices or offered discounts to attract cost-conscious customers.
This article includes reporting from The Associated Press
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