U.S. Retail Sales Unexpectedly Jump in Sign of Resilient Demand

U.S. retail sales unexpectedly rose in August as a pickup in purchases across many categories more than offset weaker demand for vehicles.

The value of overall retail purchases climbed 0.7% last month following a downwardly revised 1.8% decrease in July, Commerce Department figures showed Thursday. Excluding autos, sales advanced 1.8% in August, the largest gain in five months.

The median estimate in a Bloomberg survey of economists called for a 0.7% decline in overall retail sales, with forecasts ranging from a 3.3% drop to a 1.1% gain.

U.S. stock-index futures pared losses and bonds slipped after the report.

The surprising improvement in sales, underpinned in part by back-to-school shopping and payments for millions of families with children, suggests resilient demand for goods. The report showed firmer receipts at non-store retailers, general merchandise stores, furniture outlets and grocery stores.

The delta variant is curbing demand for services such as travel and leisure. The retail sales data showed receipts at restaurants and bars, the only services-spending category in the report, stagnated in August. Grocery store receipts climbed 2.1%.

Still, a surge in Covid-19 infections, rising prices and persistent supply chain challenges prompted a wave of downgrades to third-quarter economic growth forecasts in recent weeks.

Earlier this month, economists at Goldman Sachs Group Inc (NYSE:GS). downgraded their third-quarter consumption forecast to a 0.5% annualized decline because of delta’s impact on services spending.

Separate data on Thursday from the Federal Reserve Bank of New York showed an index of services business activity in the region slumped 13 points in September to 14.4, indicating softer growth. Another gauge showed a deterioration in the business climate.