It was almost as though American shoppers knew the Federal Reserve was going to drop its key interest rate.
According to the Commerce Department, Americans spent a little bit more with retails last month. Retail sales were up 0.1% from July to August. According to the Commerce Department, online retailers, sporting goods stores and home and garden centers all reported higher sales.
The spending news came the day before the Fed lowered its rate by a half-point, as economists had been expecting them to do.
The data indicate that consumers are still able and willing to spend more despite the cumulative impact of three years of excess inflation and the higher interest rates intended to combat rising prices, the Associated Press reported.
Average paychecks, the AP report said, have also risen since the pandemic, which has allowed many Americans to continue spending even as many necessities became more expensive. And price increases are slowing, with inflation falling to 2.5% last month. That’s the lowest it’s been in three years.
“With consumption still very healthy, for now, recession fears appear overblown,” Olivia Cross, North America economist at Capital Economics, told the AP.
Indications are the Fed is likely to reduce its key rate at its meetings in November and December, as well. Fed officials, in announcing its half-point cut Wednesday, also indicated two cuts could come next year and another in 2026.
In August, sales jumped 1.4% for online retailers and rose 0.7% at health and personal care outlets. Yet they were flat for restaurants and bars, a sign that consumers are holding back from some discretionary spending.
Gas stations reported a 1.2% drop in sales, which mostly reflected a decline in prices last month. Auto sales also ticked lower, the AP reported.
“Overall, customers remained deal-focused and attracted to more-predictable sales moments with 4th of July, Black Friday in July and the beginning of back-to-school sales events,” Best Buy’s CEO Corie Barry said recently, according to the AP.
