The United States (US) retail sales slowed in August, with growth being lower than market expectations. Retail sales increased month over month by 0.1% in August relative to July’s upward revision of 0.7%. This was due to consumers reducing their expenditure on motor vehicle purchases and clothing. August’s increase was the smallest gain since February 2018. It is likely that the increase in energy cost may have constrained consumer’s propensity to spend. Core retail sales, which excludes automobile, gasoline, building materials and food services and is mostly closely associated with consumer spending, increased by 0.1%.
US consumer spending accounts for approximately two-thirds of US economic activity. We believe that the slowdown in spending in August is not likely to negatively impact the US Federal Reserve’s decision to raise their policy rate later this month. It is anticipated that consumer spending may continue to rise over the near term supported by strong jobs data and consumer confidence.