Spending at retail stores inched higher in August as the price of gasoline fell, but demand remained muted as consumers continue to confront scorching-hot inflation.
Retail sales, a measure of how much consumers spent on a number of everyday goods, including cars, food and gasoline, rose 0.3% in August, the Commerce Department said Thursday. Economists surveyed by Refinitiv expected sales to be unchanged.
That is an improvement from the downwardly revised data in July, which showed that retail sales actually tumbled 0.4%.
The August advance is not adjusted for inflation – which rose 0.1% last month – meaning that consumers may be spending the same but getting less bang for their buck.
"Consumer spending has flatlined in real terms in the face of steep inflation and interest rate increases from the Fed," said Ben Ayers, a senior economist at Nationwide. "While retail sales continue to move higher, much of this is due to higher prices which push up the dollar volume of sales. This is another indication of the general slowdown in activity across the economy this year."
When excluding spending on autos, sales also actually fell 0.3% in August. Excluding autos and gas, sales rose 0.3%.
Sales at motor vehicle and parts dealers led all categories, jumping 2.8% last month, helping to offset a 4.2% decline in gasoline sales.
Meanwhile, sales at bars and restaurants rose 1.1% in August, even as the price of food accelerated.
The data comes as consumers face the worst inflation spike in a generation: The government reported earlier this week that the consumer price index – which measures a basket of everyday goods including rent, food and health care – climbed 0.1% in August on a monthly basis and 8.3% from the previous year, higher than expected.
The Federal Reserve has responded to the inflation crisis with the most aggressive action in decades as it races to catch up with runaway consumer prices. Policymakers approved two back-to-back 75-basis-point interest rate hikes in June and July – the first since 1994 – and have indicated that another increase of that magnitude is on the table in September.
Rising interest rates could force consumers to pull back on spending.
"July retail sales was significantly revised lower so taken together with the August report, consumer demand for goods is clearly slowing," said Jeffrey Roach, vice president and chief economist at LPL Financial. "The decline in demand is exactly what the Federal Reserve wants to see from its aggressive front-loaded rate hikes."