August consumer spending surprise
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Consumers may feel lousy about the economy, but they still won't quit spending.
- The final piece of economic data before Wednesday afternoon's Fed decision is hot. Retail sales last month surged by the most since March, when a spike in gasoline prices and a boost from tax refunds helped account for higher spending totals.
Why it matters: The spending boom is welcome news for an economy that is carrying plenty of momentum into the fall. But resilient consumer spending could make Federal Reserve officials' efforts to tame inflation that much more difficult.
By the numbers: Retail sales jumped 1.2% in August, after a 0.5% drop in spending the prior month.
- The data is not adjusted for inflation, so some of last month's strength reflects the recent run-up in pump prices. Sales at gas stations surged 3.1% last month.
Zoom in: Excluding gas stations, retail sales rose 1.1%, reflecting notably broad spending in August.
- Online sales jumped 2.6%; spending at electronics and appliance stores climbed 1.6%, and sales at restaurants and bars gained 1.2%.
- Of the top-level categories the Census Bureau tracks, just one posted a monthly decline: building materials.
What they're saying: "The report points to continued resilience in consumer spending, which, against a backdrop of persistent inflation pressures, puts further pressure on the FOMC to raise rates today," Richard de Chazal, a macro analyst at William Blair, wrote in a note.
- A closely watched measure of sales that feeds into GDP calculations rose an even stronger 1.4% in August — nearly triple what economists expected.
The bottom line: Any signs that consumers were running out of steam look a lot less convincing after August's surge, even as households faced higher prices.
