What August retail sales reveal about the changing US consumer

US consumers are still opening their wallets.

Retail and food service sales rose 1.2% in August to $773.9bn, rebounding from a revised 0.5% decline in July and comfortably exceeding economists' expectations. Sales were 6% higher than a year earlier.

But for retailers, the headline number tells only part of the story.

The August figures point to a consumer who remains willing to spend, while showing why category, channel and price point matter increasingly to retailers.

Non-store retail sales rose 2.6% during the month, electronics and appliance sales increased 1.6%, and food services and drinking places gained 1.2%.

Elsewhere, the picture was weaker. Department-store sales fell 0.8%, while building-material and garden-equipment sales declined 0.2%.

One month of category movements is not enough to establish a lasting shift in consumer behaviour. But the differences across categories show how strong aggregate retail growth can conceal very different conditions across the industry.

Strong sales, with an important qualification

August's rebound was stronger than expected.

Economists polled by Reuters had forecast a 0.8% monthly increase. Retail sales excluding automobiles, petrol, building materials and food services – a measure often used to gauge underlying consumer demand – rose 1.4%, compared with expectations for a 0.4% increase.

That suggests August's strength extended well beyond higher spending at petrol stations.

But there is an important qualification.

The Census Bureau's retail figures are adjusted for seasonal variation but not for changes in prices.

A 6% year-on-year increase in retail sales therefore does not mean Americans bought 6% more goods and services. Some of the increase reflects higher prices.

Petrol-station receipts, for example, can rise because fuel prices increase even if the volume of fuel sold does not.

For retailers, nominal sales growth is encouraging. But the volume of goods sold – and the margin generated from those sales – ultimately matters more than the headline dollar figure.

There is little in the August data to suggest that Americans have broadly stopped buying discretionary goods.

Electronics and appliance stores recorded a 1.6% monthly increase, restaurants and bars gained 1.2%, and back-to-school shopping helped support spending elsewhere.

But continued spending does not mean household budgets are under no pressure.

As inflation squeezes purchasing power, consumers can become more selective without reducing their overall spending dramatically.