U.S. consumers unexpectedly increased their spending in August, defying predictions that a softening labor market would drag down retail purchases.
Retail sales rose by 0.1 percent in August and the prior month was revised up to a 1.1 percent gain, data from the Commerce Department showed Tuesday.
The rise in sales is unlikely to stall the Federal Reserve’s plans to cut interest rates but they do suggest that the economy is not verging on a downturn, taking away some of the urgency for lower rates.
In the fed funds futures market, traders lowered the implied odds that the Fed would cut rates by 50 basis points this week and increased the odds of a 25 basis point cut.
Economists had forecast a 0.2 percent decline after the preliminary estimate for July showed a one percent increase. The monthly figures are adjusted for seasonal changes but not for inflation.
Sales at auto dealers declined 0.1 percent after surging 4.9 percent in July and falling in the prior month due to a cyberattack.
Gas station sales, which are heavily influenced by fuel prices, fell 1.2 percent.
Excluding gas stations and auto dealers and parts, sales rose 0.2 percent.
Sales were up strongly at online stores, jumping 1.4 percent from a month earlier. Sales in the category that includes sporting goods stores, hobby stories, and book stores rose 0.3 percent. Health and personal care store sales rose 0.7 percent. Sales also rose at building and garden supply stores.
Sales were down a furniture stores, clothing stores, electronics and appliance stores, department stores, and general merchandise stores. Restaurants and bars saw flat sales for the month.
Sales in what’s known as the “control group,” a category that feeds into GDP, rose 0.3 percent, in line with expectations. The control group excludes sales from auto dealers, building supply stores, gas stations, office supply stores, mobile home merchants, and tobacco stores.