Retail sales moderately higher than expected, double dip not likely

Overall retail sales were stronger than expected, increasing 0.4% in August. Retail sales excluding autos increased 0.6% in August, also stronger than forecasts.

Retail sales excluding autos, building materials and gasoline—the component of this report that feeds into the calculation of nonauto goods consumer spending within GDP—rose a solid 0.6% in August.

BOTTOM LINE

This moderately stronger-than-expected report supports our third-quarter projection of 2% growth in real PCE (in our opinion, the balance of risks appear tilted to a slightly stronger advance in spending). Households have boosted the average savings rate to 6%, which we judge to be around the desired rate given the level of stock market and housing wealth, and this permits spending to grow in line with moderate growth in labor incomes as the job market slowly improves. Looking within the data, the bright area of the retail sector in recent months has been general merchandise sales.

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