Solid Pace For Third-Quarter Consumer Spending

An upward revision to a very strong July offsets an unexpectedly flat August to make for a solid pace so far in third-quarter consumer spending. Retail sales inched only 0.1 percent ahead in August to come in below Econoday's consensus range. The plus in the report is a 2 tenths upward revision to July which now stands at a 0.7 percent gain.

Weakness in August is tied to motor vehicles where sales fell 0.8 percent following 0.1 percent declines in the prior two months in what is a very poor run for the auto industry. Apparel stores have been up and down and were very down in August at a 1.7 percent decline. Department stores have also been up and down and were also down in August, falling 1.0 percent. Sales at furniture stores have been soft, sinking 0.3 percent in the month, as have sales of building materials in what together are more negative indications for residential investment.

Positives include another strong gain for nonstore retailers, up 0.7 percent as e-commerce continues to muscle out gains. Sales at gas stations, reflecting higher pump prices and also strong driving demand, rose 1.7 percent. Restaurants, which have been very strong, pulled out another monthly gain though a small one at 0.2 percent.

August was a soft month but looking at year-on-year rates helps confirm underlying strength. Total retail sales rose 6.6 percent in August, little changed from July's 6.7 percent. And leading the sector are nonstore retailers at 10.4 percent followed by an outstanding showing for restaurants, at 10.1 percent in a gain that underscores the fundamental health and spirit of the consumer.