Crisis-era level job anxiety and inflation couldn't deter consumers
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Sarah Grillo/Axios
Hiring is stalling, job security anxiety is at crisis-era levels, and inflation is on the upswing.
- None of that deterred consumer spending this summer.
Why it matters: The resilient American consumer has been the constant throughout the economic cycle. There is only so much the economy can slow if consumer spending — two-thirds of activity — continues to hold up.
What they're saying: "Consumers have taken notice of the many challenges facing the economy; weakening labor conditions, the inflationary impact of tariffs, changes to the tax code, and a reprioritization of fiscal policy are all among the catalysts defining the outlook," Jim Baird, chief investment officer at Plante Moran Financial Advisors, wrote in a note.
- "Against an uncertain backdrop, retailers posted surprisingly solid sales gains in August, signaling that consumers — despite their many concerns — aren't yet ready to rein in spending," Baird added.
- "That could change if labor conditions continue to deteriorate in the coming months if slower job creation ultimately transitions to higher layoffs," he wrote.
By the numbers: Retail sales rose 0.6% in August, matching the previous month's upwardly revised pace. That blew past economists' expectations of a mere 0.3% increase.
- Of the 13 major retail categories, just four showed a pullback in spending relative to July, including a catch-all category for miscellaneous stores (-1%) and furniture shops (-0.3%).
- E-commerce sites (+2%), clothing retailers (+1%) and sporting goods stores and other hobby shops (+0.8%) saw the biggest pick-up in spending.
The intrigue: Consumer spending has not shown the economy's cracks that have been apparent elsewhere.
- Buoyant shopping activity has defied recession fears since 2022. Consumers were sitting on excess savings from the pandemic era, helping propel spending in recent years, though that has since dried up.
- The retail sales control group — which excludes volatile categories like building materials, gasoline and food services and feeds into the consumption category of GDP — rose 0.7% in August.
- That suggests "Q3 economic growth will be stronger than originally thought," LPL Financial chief economist Jeffrey Roach wrote in a note.
Yes, but: Some of the catalysts that have convinced consumers to open their wallets are fading.
- The strength of consumer spending in recent months has been chalked up to tariff front-running, or buying now to get ahead of potential tariff-related price increases.
- Some of that might have seeped into August if consumers bought goods before the Trump administration scrapped the de minimis exemption that allowed small businesses to import goods valued under $800 duty-free.
- Wealthier Americans, who have benefited from massive stock market gains, drive the bulk of the nation's spending. That might mask any possible slowdown among lower-income consumers.
Between the lines: The data, which isn't adjusted for inflation, might also be explained by higher prices.
- Half of the increase in clothing store spending reflected tariff-related price rises, according to calculations by Pantheon Macroeconomics.
The bottom line: If the trend continues, America's resilient consumer could help put a floor under a U.S. economy taking hits from President Trump's trade policy.
