Author Topic: Retail sales slow in August  (Read 561 times)

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Offline Matthew

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Retail sales slow in August
« on: September 14, 2006, 09:52:47 AM »
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  • NEW YORK ( -- Retail sales rose moderately in August versus forecasts for a decline, the government said Thursday, but the gain was tempered by a slowdown in auto sales.

    The Commerce Department said that sales last month edged up 0.2 percent after rising a much stronger 1.4 percent in July.

    Economists surveyed by had forecast a decline of 0.2 percent for last month.

    Stripping out volatile auto sales, retail sales rose 0.2 percent versus a revised 0.6 percent increase the previous month. Economists, on average, had forecast a gain of 0.3 percent.

    Auto sales rose 0.4 percent last month following a 4.3 percent surge in July. But most economists had forecast a decline for auto sales in August after automakers reported a sharp drop in U.S. sales last month, due to slumping demand for pickups and SUVs.

    "I am puzzled by this report. There seems to be somewhat of a disconnect," said Scott Hoyt, economist with, noting he expects the government will revise retail sales for September lower later this year.

    "Whenever you've got a strange disconnect like this, you almost always have to anticipate it," Hoyt said.

    Ian Shepherdson, chief economist with High Frequency Economics, seemed to agree.

    "Overall, this report is softer than it looks,' Shepherdson said in a note. "The headline is flattered by an inexplicable increase in auto sales, which cannot be squared with the 6.3 percent drop in unit sales reported by the automakers. Expect a downward revision."

    At the same time, the recent retreat in gas prices helped to divert consumers' dollars and lift sales of products in other discretionary categories.

    Sales at gas stations fell 1 percent last month compared to a 1.6 percent gain the previous month.

    Food and beverage sales rose 0.6 percent. Sales of sporting goods, books, music and movie DVDs increased 0.8 percent. General merchandise stores posted a 0.4 percent gain.

    While the drop in gas prices is clearly a plus for consumer spending, Hoyt pointed out that energy costs, including gasoline, typically represent only about 7 to 8 percent of the household budget.

    "It's easy to overdo the gas price effect," Hoyt said. "Housing has a more serious consequence on spending patterns because slowing housing activity has an adverse effect on household wealth and mortgage equity withdrawals. With a cooling housing market, consumers have less cash to pull from their homes to spend elsewhere like electronics and furniture."

    According to the report, furniture sales fell 0.3 percent in August while clothing sales also slipped 0.3 percent. Sales of consumer electronics edged up 0.1 percent after a 0.7 percent jump in July. Department store sales slipped 0.2 percent dip.

    Last month Wal-Mart (Charts) reported August same-store sales, or sales at its stores open at least a year, rose 2.4 percent. Rival Target (Charts)'s same-store sales rose 3.1 percent, but fell short of analysts' forecast.
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