In late summer, the price of gasoline quietly set the rhythm of American commerce: a rise at the pump lifted the national retail tally above what economists had expected, while the quieter, underlying flow of shopping barely stirred. It is a familiar human pattern, in which households are pulled by the cost of getting around before they are free to spend on everything else. Beneath the figures lies a question about how long the cushions of pandemic savings and steady wages can keep carrying ordinary budgets, a question the coming autumn will begin to answer.
Higher Gasoline Prices Lift August US Retail Sales Above Forecasts
A surge in gasoline prices likely squeezed budgets for low-income families.
Gasoline did most of the work in August.
Mark
The headline says sales beat expectations. Is that good news?
Mimi
It's a mixed picture. The 0.6% gain topped the 0.2% forecast, but gasoline stations drove much of it. Without them, sales rose only 0.2%.
Mark
So higher prices are inflating the number?
Mimi
Retail sales aren't adjusted for inflation, so yes, a pricier gallon of gas raises receipts without more being bought. The report says the surge likely squeezed low-income families.
Luke
Worth flagging that word, likely. The report doesn't measure that squeeze directly. It's an inference from the price data.
Mark
What about the core number?
Mimi
Core sales, which exclude autos, gasoline, building materials and food services, rose just 0.1%. July was also revised down, from 1.0% to 0.7%.
Luke
And core sales track the consumer spending piece of GDP, so that's the weak spot. But the report expects services spending to carry consumption, and that's an expectation, not a measurement.
Mark
Then why are GDP estimates as high as 5.6%?
Mimi
Services like concerts and movies look strong, and the labor market is tight. Claims were 220,000, below the 225,000 forecast.
Luke
Keep in mind 5.6% is the top of the range of estimates, not a consensus. And the Labor Day holiday may have distorted the claims figure.
Mark
What's the risk ahead?
Mimi
Savings are being drawn down, card delinquencies are at an 11-year high, and student loan payments restart in October. Goldman estimates about $70 billion.
Luke
That's one bank's estimate. How households actually respond is still unknown.
Il Polso
- Retail sales jumped 0.6% in August, well above the 0.2% forecast, and the surprise hinged almost entirely on what drivers paid at the pump.
- Strip away gasoline and the gain sinks to 0.2%, while core sales barely crept up 0.1%, exposing a softer foundation beneath the headline.
- Credit card delinquencies have reached an 11-year high, and families stretched by fuel costs are leaning on borrowing to keep pace.
- Jobless claims ticked up to 220,000, still low, so the labor market holds firm even as household cushions thin.
- All eyes now turn to October, when resumed student loan payments threaten to drain billions more from budgets already running lean.
In late summer, the price of gasoline quietly set the rhythm of American commerce: a rise at the pump lifted the national retail tally above what economists had expected, while the quieter, underlying flow of shopping barely stirred. It is a familiar human pattern, in which households are pulled by the cost of getting around before they are free to spend on everything else. Beneath the figures lies a question about how long the cushions of pandemic savings and steady wages can keep carrying ordinary budgets, a question the coming autumn will begin to answer.
Gasoline carried August. The Commerce Department reported that U.S. retail sales rose 0.6% for the month, well ahead of the 0.2% economists had expected, and much of that strength came from service station receipts as pump prices climbed through the summer. By the third week of August, a gallon cost $3.984, the highest of the year and a clear jump from July.
The headline looked strong, but the picture beneath it was more modest. Without gasoline, the gain shrank to 0.2%, and the core measure, which tracks the spending most closely linked to GDP, managed only 0.1%. July was also revised down. Online sales were flat after a Prime Day that may have pulled purchases forward, and early back-to-school shopping likely did the same. For low-income families, the fuel surge was a direct squeeze on what remained for everything else.
Still, there were signs of resilience. Americans were spending on concerts, movies and sporting events, and forecasters saw third-quarter growth potentially running as high as a 5.6% annualized rate. Wages from a tight labor market continued to support spending, and jobless claims rose only modestly to 220,000, still near the low end of the year's range.
Yet the cushions are thinning. Pandemic-era savings are being drawn down, credit card balances have swelled, and delinquencies have hit an 11-year high. The next test comes in October, when millions resume student loan payments, an outflow Goldman Sachs estimates at roughly $70 billion.
Gasoline did most of the work in August. The Commerce Department reported on Thursday, Sept. 14, that U.S. retail sales rose 0.6% for the month, well above the 0.2% gain that economists polled by Reuters had forecast. A large share of that strength came from receipts at service stations, where prices climbed through the month.
The Energy Information Administration put the pump price at $3.984 per gallon in the third week of August, the highest of the year. In the same week of July it was $3.676. Retail sales figures are mostly goods and are not adjusted for inflation, so a jump in fuel prices shows up directly in the total. Strip out gasoline stations and the August gain shrinks to 0.2%. The surge likely squeezed the budgets of low-income families.
July was revised down: sales advanced 0.5% rather than the 0.7% first reported. Online retail sales were flat in August. Amazon's Prime Day in July, the biggest on record, and parents who began back-to-school shopping early likely pulled some spending forward into the earlier month.
The narrower measure is less flattering. Excluding automobiles, gasoline, building materials and food services, sales edged up just 0.1% in August. July's figure for these so-called core sales was cut to 0.7% from 1.0%. Core sales line up most closely with the consumer spending component of GDP, which makes the soft reading notable.
Still, spending on services is expected to be strong enough to lift consumption. There is evidence that Americans are paying for concerts, movies and sporting events, which likely drives consumer spending and the wider economy this quarter. Estimates for third-quarter GDP growth run as high as a 5.6% annualized rate, compared with the 2.1% pace of the April-June quarter.
The support under households is real but thinning. Higher wages from a tight labor market continue to underpin spending. Meanwhile, excess savings built up during the COVID-19 pandemic are still being run down, and credit card balances have risen sharply. Recent New York Federal Reserve data showed delinquencies at an 11-year high in the second quarter.
The labor market itself remained firm. A separate Labor Department report showed initial claims for state unemployment benefits rose to a seasonally adjusted 220,000 for the week ended Sept. 9, from 217,000 the week before. Economists had expected 225,000. The week included the Labor Day holiday, which could have added volatility. Claims sit at the lower end of this year's range of 194,000 to 265,000.
The next test arrives in October, when millions of Americans resume student loan payments. Goldman Sachs estimates that full resumption would take roughly $70 billion, or about 0.3% of disposable personal income, out of household budgets.
Citazioni salienti
Resuming student loan payments in full would equal roughly $70 billion, or about 0.3% of disposable personal income.— Goldman Sachs estimate, cited by Reuters
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Economy & Finance