US retail sales rebound sharply in August

U.S. retail sales surged more than anticipated in August, driven by increased consumer spending on vehicles and back-to-school purchases, according to the Commerce Department's Census Bureau. Sales rose 1.2% last month, following a revised 0.5% decline in July, which marked the first decrease in nine months. Economists surveyed by Reuters had anticipated a 0.8% rebound in retail sales after a previously reported 0.6% drop in July, with estimates varying from a 0.2% gain to 1.1%.

The uptick was partly due to higher gasoline prices, which boosted sales at service stations. Despite high inflation, households continued to spend, influenced by oil price shocks and supply chain issues stemming from the U.S.-led conflict with Iran. However, consumers have become more selective, focusing on cheaper goods. Consumer sentiment declined this month, while wage growth remains steady and stock market gains have occurred.

Households are also saving less, using their savings instead. The retail sales data, along with persistent high price pressures and a stabilizing labor market, following recent summer turmoil, suggests the Federal Reserve may raise interest rates in an upcoming meeting. Core retail sales, excluding automobiles, gasoline, building materials, and food services, grew 1.4% in August, surpassing the economists' forecast of a 0.4% increase.

Economic growth projections for the third quarter now exceed a 2.0% annualized rate, with the economy expanding at a 1.5% pace in the previous quarter.