Despite rise in COVID infections, retail sales unexpectedly jumped
NEW YORK — Americans continued to spend at a brisk pace last month in the face of rising COVID-19 infections, though much of it was done online and not at restaurants or other sectors in the U.S. economy beleaguered by the arrival of the delta variant.
Retail sales rose a seasonally adjusted 0.7 percent in August from the month before, the U.S. Commerce Department said Thursday. That uptick caught most economists by surprise. Consensus estimates were for a decrease of 0.85 percent, according to a survey of economists by FactSet.
The surprising improvement in sales, underpinned in part by back-to-school shopping and payments for millions of families with children, suggests healthy demand for goods. The report showed firmer receipts at online retailers, general merchandise stores, furniture outlets and grocery stores.
Online sales soared 5.3 percent last month, while sales at restaurants and bars, many of which believed they were through the worst of the pandemic until the arrival of delta, were flat from the month before.
Earlier this year as millions were vaccinated, restaurants, bars and other venues that rely on crowds began to bustle for the first time since early 2020. Then, in July, U.S. health officials recommended that even vaccinated people should wear masks when indoor in public due to the unchecked spread of delta, particularly in regions of the country with lower vaccinations rates.
Vaccine hesitancy in the U.S. is being cited by economists after the Labor Department reported this month that employers added just 235,000 jobs in August, far short of the million or so jobs added in each of the previous two months.
Back-to-school shopping may have given retail sales a boost. Sales at department stores rose 2.4 percent last month, according to the Commerce Department, as children headed back to the classroom and perhaps for the first time in more than a year, bought new clothing and other supplies.
The retail report released Thursday covers only about a third of overall consumer spending and doesn’t include services such as haircuts, hotel stays and plane tickets. There is clear evidence that spending has waned in some of those industries. Airlines, for example, recently reported a dropoff in ticket sales and they blame the spread of the delta variant.
Auto sales continued to fall last month, likely because fewer cars were made due to a pandemic-related shortage of chips, which are needed to power screens and other tech features in cars. Sales at auto dealerships sunk 3.9 percent last month, the Commerce Department said.
Americans have also been confronted with higher prices across a variety of goods and services in recent months as businesses pass on — at least in part — extra costs associated with constraints on materials and labor. The degree to which that played a role in the retail sales data is not clear as the figures are not adjusted for price changes.
So-called control group sales, which are used to calculate gross domestic product and exclude food services, auto dealers, building materials stores and gasoline stations, jumped 2.5 percent in August — the most in five months.
Some economists still hope for a larger bump in consumer activity this year. The four-week average of jobless claims, which smooths out fluctuations in the weekly data, dropped for the fifth straight week, the Labor Department said Thursday. That’s the lowest since the pandemic began.
More people are finding jobs and many of those who have remained in their jobs have saved cash during the pandemic and will have more to spend, said Sal Guatieri, a senior economist at BMO Capital Markets.
“The surprising upturn in August retail sales supports this positive message,” Guatieri wrote.
However, much depends on whether the U.S. can contain the spread of the virus.
The Labor Department also reported Thursday that the number of Americans seeking unemployment benefits ticked higher from a pandemic low last week, a sign that the spread of the delta variant may have slightly increased layoffs.