Retail Sales Jump 1.2% in August, but Read the Fine Print
American shoppers spent more in August. The Census Bureau reports that retail sales rose 1.2% from July to $773.9 billion, the largest monthly gain in five months. Compared with a year ago, sales were up 6.0%.
The rebound follows a soft stretch. July's figure was revised to a 0.5% drop, which makes August's gain look larger by comparison.
Two caveats are worth keeping in mind. First, these are current-dollar figures, which means they are not adjusted for price increases. Second, gas-station sales were up 21% from a year earlier. When one category rises that sharply, it can shape the overall year-over-year number, so the 6.0% headline doesn't tell you that people are buying 6% more stuff.
The home-related categories
For those of us who care about housing, two lines stand out.
- Furniture and home furnishings rose 0.9% from July and 1.9% from a year ago.
- Building materials fell 0.2% from July but are up 5.1% from last year.
Those are modest, mixed signals. Furnishings are inching up. Building materials slipped for the month but remain well above last year. I wouldn't read a trend into either one. But I would say that households are still spending on their homes, even if the pace is uneven.
What it means for buyers and sellers
Strong retail numbers can be encouraging, and they suggest consumers have not stopped spending. But spending is not the same as confidence about a big purchase, and it is not the same as the ability to qualify for a mortgage. A shopper who fills the tank and buys a sofa is not necessarily ready to buy a house.
For sellers, one practical takeaway: buyers will still spend on homes that feel finished and ready. For buyers, remember that renovation costs are part of the price of any house that needs work, so build them into your budget from the start.
The next retail sales report is due Oct. 15. I'll be watching to see whether August was the start of something or simply a bounce after a weak July.
Source: U.S. Census Bureau, Monthly Retail Trade report.
