Several economists reined in their expectations for August retail sales, but managed to be disappointed nonetheless, as the U.S. Department of Commerce reported a 2.6% year-over-year increase for retail (excluding gas stations and motor vehicles). National Retail Federation Chief Economist Jack Kleinhenz in emailed comments called the month "topsy-turvy," noting "uncertainty regarding back-to-school spending and other issues."
But Kleinhenz also said that "consumer spending remains intact even if sales grew less than July." Indeed, the cohort tracked by Retail Dive fared quite a bit better, boosting sales in the month 5.3% year over year, with non-store retail leading the way with a 22.6% increase. But even those numbers represent a retreat from earlier in the summer. The government's partial renewal of the stimulus package, which a few months ago helped thwart financial fallout from the pandemic, propped up August spending to some extent, analysts said.
But many shoppers hunkered down.
"Consumers continued to spend more according to the retail sales report for August, but the monthly gains are slowing," Robert Frick, corporate economist at Navy Federal Credit Union, said in emailed comments. "Good gains in jobs may be outweighing the lack of more government stimulus, though much of that stimulus was banked by consumers and remains in reserve for the months ahead."
Unsurprisingly, that's hitting lower-income households harder, but the high level of uncertainty is tempering consumption at all levels, according to GlobalData Retail Managing Director Neil Saunders.
"Some, especially those on lower incomes, found that they could no longer sustain spending in the way they did in previous months," Saunders said. "Others, even in more comfortable financial positions, became nervous about spending as the safety net of higher benefits was withdrawn."
That, along with the specific changes and uncertainties surrounding the school year at all grade levels, made for subdued back-to-school spending. That threatens to spill into the holiday season, especially as the partial stimulus renewal dries up. In fact, Deloitte this week posited two possible holiday retail scenarios: One with meager 0% to 1% growth due to "mounting anxieties" about finances and health, and another somewhat better, if there's federal economic relief and, perhaps, a COVID-19 vaccine.
The uncertainty and variegated outcomes seen in August are likely to play out at the holidays, according to Rod Sides, Deloitte vice chairman and U.S. retail and distribution sector leader. But he sees enough evidence of spending last month to suggest that at least wealthier consumers could help push holiday spending to Deloitte's higher number. Upper income earners are saving money right now because they're traveling and dining out less, and all consumers are likely yearning to be in touch, at least figuratively, he said.
"We think it's going to manifest itself in more gift spending and gift giving," Sides said by phone Wednesday. "There is some optimism out there. We also tend to want to reach out to people, it's what we found in the last downturn. Average spending went down, but people want to connect."
Still, "the pace of growth here will be slow and insufficient to benefit all Americans," GlobalData's Saunders said. "The result is that this winter will see a likely cooling of activity in retail."
