Retail Sales, Mainly Gas, Jumped in August

 customer pumps gas at a gas station on September 13, 2023 in Petaluma, California. According to a report by the Labor Department, surging gas prices in August contributed to a rise in inflation as consumer spending rose to 3.7 from 3.2 percent in July.

Justin Sullivan / Getty Images

U.S. consumers still have enough buying power to keep on spending—at least on gasoline.

Key Takeaways

  • Spending at retailers jumped 0.6% in August, the highest since May but mostly due to the rising price of gasoline.
  • Take gas stations out of the equation, and spending only grew 0.2%, the slowest pace of growth since March.
  • Multiple factors are hurting our ability to spend, including a slowing job market, high interest rates, and consumer credit growing costlier and harder to get.

Retail sales rose 0.6% in August from July, according to data released by the Census Bureau Thursday. That was the fastest pace of growth since May and up from the 0.5% increase in July.

The report beat expectations of economists polled by Dow Jones Newswires and the Wall Street Journal, who had anticipated only 0.1% growth. However, the uptick was mainly because people spent more money at gas stations amid rising prices, with gas receipts rising 5.2% over the month.

Take away gas sales, however, and consumers looked a little less spend-happy. Excluding gas, sales rose 0.2% over the month, the slowest growth since March. A separate report this week  on spending from Visa showed that rising gas prices forced people to shift where they spent their money in August.

The census report Thursday also took some of the wind out of July’s retail sales by a downward revision in growth to 0.5% from the surprisingly high 0.7% initially reported.

Up to this point, consumer spending, the main engine of U.S. economic growth, has helped to hold off a long-predicted recession. However, economists question how long people can keep cash registers ringing. Employers are pulling back on job openings and banks are growing more selective about extending credit. High interest rates are making consumer credit more costly, and payments on federal student loans are set to resume in October.

Furthermore, high inflation over the last few years has eaten into the stockpile of savings that some U.S. households built up during the pandemic, according to an analysis by the Federal Reserve Bank of San Francisco, which predicts the “excess savings” will run out in the third quarter of the year. 

“While consumers keep on spending, we still ultimately believe households will face bigger hurdles in the remainder of the year,” Tim Quinlan and Shannon Seery, economists at Wells Fargo Securities, wrote in an analysis. “Households’ capacity to spend is dwindling, will their willingness follow suit?”

All that friction in the economy is by design—the Federal Reserve has thrown sand in the economic gears by raising its benchmark interest rate 11 times since March 2022, raising borrowing costs on all kinds of loans. The strategy is to discourage spending and bring supply and demand back into balance to subdue the high inflation that set in when the economy re-opened from pandemic shutdowns.

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  1. Census Bureau. "Advance Monthly Sales for Retail Goods and Services, August 2023."

  2. Federal Reserve Bank of San Francisco. "Excess No More? Dwindling Pandemic Savings."

  3. Wells Fargo Securities. "Upward Surprise in August Sales Overstates Consumer Resilience."

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