US Spending Remains Robust Despite The Slide In Sentiment

(MENAFN- ING) Spending surges in August, led by internet stores

US retail sales rose 1.2% month-on-month in August versus expectations of a 0.8% MoM gain. The control group, which excludes volatile items such as gasoline, restaurants, building materials and autos, rose 1.4% MoM – much better than the 0.5% consensus forecast. Internet sales bounced back, rising 2.6% MoM – Amazon's Prime Day was earlier than usual this year, which boosted June sales at the expense of July (-1.7% MoM) and we saw a subsequent recovery in August. Eating & drinking out posted a decent 1.2% increase with miscellaneous stores rising 1.9%, electronics rose 1.6% with gasoline station sales rising 3.1% on higher prices – remember this report is based on nominal dollar sales figures, not sales volumes. On the weaker side, building material stores experienced a 0.2% drop, grocery stores saw sales growth of only 0.4% while clothing rose 0.7%.

Retail sales values (Feb 2020 = 100) Source: Macrobond, ING

"> Consumers keep spending despite growing financial pressure

In general, it indicates robust consumer activity despite very weak consumer confidence readings and reinforces the K-shaped consumer narrative whereby high-income households, buoyed by big wealth gains over the past five years, are spending strongly. Meanwhile, middle and lower income households are increasingly being squeezed, with the University of Michigan sentiment measure suggesting households are the most anxious they have been for 50 years! The fundamental drivers of spending for most households remain under pressure – an 18-month flat lining in real household disposable incomes is the biggest issue – which means households are saving less of their income in order to maintain lifestyles. Another sign of stress is the rise in credit card and auto loan delinquencies.

Real household disposable income (chained 2018 $bn) Source: Macrobond, ING

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