Retail sales top Wall Street estimates in August

Retail sales beat Wall Street estimates in August, as investors kept a close eye on any signs of slowing consumer spending. The data comes as the Federal Reserve begins its two-day policy meeting in Washington where the central bank is expected to cut interest rates sharply as data on slower economic growth and lower inflation.

Retail sales rose 0.1% in August. Economists had expected a 0.2% spending decline, according to Bloomberg data. Meanwhile, according to Census Bureau data, retail sales were revised up to a 1.1% increase in July, up from the previous reading that showed sales rose 1% in the month.

“Stronger-than-expected retail sales data for August suggests that, driven by faster asset gains and lower electricity prices, consumers continue to spend freely despite a slowdown in the labor market,” Capital Economics North America economist Olivia Cross wrote in a note to clients on Tuesday. .

August sales excluding autos and gas rose 0.2%, below consensus estimates for a 0.3% increase. The control group in Tuesday's release, which excludes several volatile categories and factors in the gross domestic product reading for the quarter, showed a 0.3% increase in August, in line with estimates.

Inside the report, miscellaneous store retailers were the biggest gainers with sales up 1.7% while a 1.2% decline in sales at gasoline stations dragged down the overall headline numbers.

Cross added, “For now, the fear of recession is too much with eating healthily.

The release comes as investors widely expect the Fed to cut interest rates for the first time since 2020 when its next policy decision is announced at 2pm on Wednesday.

“I don't think it's really going to change anything,” Stephen Juneau, senior U.S. economist at Bank of America Securities, told Yahoo Finance. “It's kind of unpleasant.”

Markets have debated how big of a cut the Fed will enact. As the labor market showed signs of slowing and inflation drifted toward the Fed's 2% target, markets shifted to price a 50 basis point cut from the Fed, and August retail sales data did little to change that thinking.

According to the CME FedWatch tool, markets on Tuesday morning had a 67% chance the Fed would cut interest rates by 50 basis points, compared to a 33% chance the Fed would choose to cut 25 basis points.

Josh Schafer is a reporter for Yahoo Finance. Follow him in X @_joshschafer.

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