Boosted by the government’s “cash-for-clunkers” program, retail sales rebounded in August posting its largest monthly increase since January 2006. The U.S. Census Bureau reported today that Advance Estimates of U.S. Retail and Food Services sales for August increased 2.7% from the prior month to $351.4 Billion. Excluding automobiles, retail and food services sales increased 1.1% from July, the best showing since January of this year.
Auto sales enjoyed their best month in nearly 8 years, increasing 11.9% from July and just slightly down from a year ago. While there will certainly be a drop-off in September after the expiration of the clunkers program, automakers are trying to cushion the fall with a heavy dose of cash rebates and creative warranties, i.e. money-back guarantees for car buyers who lose their jobs. This sounds like business as usual for the struggling car-makers – sacrificing profits and margins to drive short-term sales.
While the monthly gains were impressive, sales are still down 5.3% from the year ago period (-6.2% ex autos). Those YoY figures will start to improve dramatically heading into the end of this year regardless of performance, as retailers will be up against comps from last fall when sales fell off a cliff:
Also, we suspect seasonal adjustments played a role in the monthly gains. Based on results from individual retailers who reported August sales earlier this month, it’s apparent that apparel and department store retailers continue to struggle. However, the government report shows both of those sectors posting a 2.4% increase in sales from the prior month, with substantial improvements in YoY figures. We expect there will be downward revisions when next month’s report is released.
As stock prices have risen and consumers’ future expectations of the economy have started to improve, shoppers are becoming a little less cautious about their spending. However, we won’t see a substantial pick-up in demand until the employment and income situation improves. Year-over-year figures should start to show gains starting in October, as comparisons will be up against the post-Lehman bankruptcy period last year.
Click here to see detailed results by type of business.
