Shoppers showed up in August. Retail sales increased 1.2% from July, beating the 0.8% median forecast in a Bloomberg economist survey. July's figure was revised to a 0.5% decline. These data are not adjusted for inflation. Under the hood, the control group that feeds into the government's measure of goods spending for GDP climbed 1.4%, the strongest advance in almost two years, signaling broad momentum.
Consumers have kept spending this year even as the lift from tax refunds faded, with low unemployment and stock market gains giving households some cushion. As Wells Fargo economist Shannon Grein put it, "This consumer has time and time again surprised us with their resilience," though she added, "I don't think the consumer has enough support behind them to keep at this pace. This is a very strong retail sales print, so I'd expect them to pull back."
It was nearly a clean sweep: 12 of 13 categories posted gains. Gas station receipts climbed 3.1%. Nonstore retailers, largely online shopping, rose 2.6% for the strongest monthly increase since February 2025 after a prior-month drop.
Amazon shifting Prime Day to June from July last year likely distorted patterns and dragged down July's headline number. Restaurants and bars rose 1.2%.
Auto and parts dealers were up 0.6%, and separate industry figures earlier this month showed August auto sales running at the fastest pace since April 2025. Strip out autos and gasoline, and retail sales still rose 1.2%.
Back to school likely boosted general merchandise stores along with apparel, electronics, sporting goods and hobby spending. The lone laggard: building materials stores.
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A Bureau of Labor Statistics report last week showed overall consumer prices were 3.4% higher than a year earlier, an increase totaling a full percentage point after the Iran war pushed energy costs higher. Many households are feeling the squeeze: inflation adjusted average hourly earnings fell from a year earlier for the fifth straight month in August.
Gas isn't helping. AAA data show the national average stayed above $4 a gallon through August and climbed past $4.30 this month, with wars in the Middle East and Ukraine limiting fuel supplies.
Import costs are adding to the pressure too. Separate data Wednesday showed U.S. import prices rose more than expected in August and were up 7% from a year earlier, the largest annual gain in four years.
With inflation exceeding its target for more than five years, the Federal Reserve is considering another rate increase. Futures pricing suggests investors are looking for a quarter point hike when policymakers wrap up their two day meeting later on Wednesday. In the words of Bloomberg Economics: "Strong consumer demand gives the Fed room to tighten - though the costs are likely to fall disproportionately on interest-sensitive sectors like labor and housing that are already weak." - Eliza Winger
Retailers are adapting to choosier shoppers. Walmart said last month it cut prices on thousands of items, helped in part by proceeds from tariff refunds. Even so, higher energy and import costs are colliding with softer real wage growth, which could test spending momentum after August's surge. As Stephen Stanley, chief U.S. economist at Santander US Capital Markets LLC, put it, "It is hard to imagine that the degree of strength seen in August retail sales can be sustained through the fall, but I expect the consumer to weather this storm."
If you are watching the economy from your kitchen table, here is the gist: spending is broad and sturdy, prices are still running hot, and another Fed hike is the base case. That mix can ripple into everything from your grocery bill to what you pay at the pump and the rate on your next mortgage.
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