US “horror data” surpassed expectations! Retail sales increased 1.2% month-on-month in August, the biggest increase in 5 months

The Zhitong Finance App learned that retail sales in the US recorded the biggest month-on-month increase in 5 months, with a wide range of growth, showing that despite rising gasoline prices and continuous contraction in actual wages, consumers continued to spend with the support of the stock market and employment. According to data released on Wednesday, retail sales increased 1.2% month-on-month in August, which is significantly better than the 0.8% month-on-month increase generally predicted by economists. After the July data was revised, it was a 0.5% month-on-month decline.

Of the 13 retail categories covered by the report, 12 achieved growth, including gas stations and online retailers. Shopping during the back-to-school season may have boosted department store spending, while also boosting spending on clothing, sporting goods, and electronics.

So-called “control group” sales — the indicator used by the government to calculate commodity spending in gross domestic product (GDP) — grew by 1.4%, the biggest increase in nearly two years. This indicator does not include catering services, car dealerships, building materials stores, and gas stations.

Sales of non-physical retailers (mainly online shopping) increased 2.6% in August, the biggest increase since February 2025, after falling in the previous month. This year, Amazon (AMZN.US) advanced the Prime Day promotion from July to June of the previous year. This timing adjustment may have distorted the data and dragged down the overall retail sales data for July.

Petrol station sales increased 3.1%. According to data from the American Automobile Association (AAA), as of the end of August, the average price of gasoline in the US remained above $4 per gallon. Gasoline prices rose further to over $4.30 per gallon this month as the war in the Middle East and Ukraine limited fuel supplies.

Retail data also showed that sales of motor vehicles and parts dealers increased by 0.6%. According to industry data released earlier this month, car sales in August rose to the strongest level since April 2025. Excluding automobiles and gasoline, retail sales also increased by 1.2%. Restaurant and bar revenue growth was strong, reaching 1.2%. The restaurant industry was the only service category in the retail report.

Since about 70% of US GDP is driven by consumer projects, retail sales data is an important guide for investors to judge the current state of the US economy and monetary policy prospects. At the time of the release of the latest retail sales data, the Federal Reserve is considering raising interest rates to curb inflation — the inflation rate has been higher than the central bank's target for more than five consecutive years.

At 2 a.m. Beijing time on Thursday, the Federal Reserve will announce the interest rate decision and the latest economic forecast. Half an hour later, Federal Reserve Chairman Walsh held a press conference. A month ago, the market believed that the probability of this rate hike was only 33.1%. Now this set of figures is close to 95%, and the market's pricing of interest rate hikes is close to one-sided. If the Federal Reserve raises interest rates as scheduled, this will also be the first time in more than three years that the Federal Reserve has raised interest rates.

Since this year, US consumer spending has remained resilient, boosting overall economic growth. Although the boost from tax rebates has subsided, low unemployment and rising stock markets are still supporting families. Meanwhile, US retailers are looking for ways to attract more discerning consumers. Walmart (WMT.US) said last month that the company cut the prices of thousands of products, with part of the funding coming from tariff refunds. However, as wage increases fail to keep up with rising prices, many Americans are still under pressure on the cost of living. Compared to a year ago, the inflation-adjusted average hourly wage declined for the fifth month in a row in August.