This increase comes after a 0.2 percent dip in sales in July and a projective increase of 1.9 percent, according to a Bloomberg survey of economists. Automobile sales led the way with a 10.6 percent increase as consumers took advantage of the federal “Cash for Clunkers” program. Retail sales excluding auto sales went up 1.1 percent, also beating expectations.
“Cash for clunkers” allowed consumers to trade in gas-guzzling vehicles for more fuel-efficient ones in exchange for a cash rebate. As a result, Toyota Motor Corp., General Motors, and Ford Motor Co. all experienced significant sales jumps. The program was earmarked $3 billion in federal funding and expired on Aug. 24.
“Even excluding the strong growth in motor vehicle sales, which was a result of the successful ‘Cash for Clunkers’ program, this significant increase in consumer spending shows that the Recovery Act and President Obama’s other economic initiatives are succeeding in putting the brakes on the recession,” U.S. Commerce Under Secretary for Economic Affairs Rebecca Blank said in a statement.
“Accelerated stimulus spending in the second half of this year will create jobs and further stimulate our economic recovery,” she continued.
Perhaps even more significant is the 1.1 percent jump in non-automobile purchases.
Many economists assumed that a late Labor Day this year would push most back-to-school shopping to September. But after Tuesday’s release, it seems that theory was overly pessimistic as consumers spending easily beat expectations.
According to a note by Guy LeBas, director of fixed income at Janney Montgomery Scott, obtained by the Wall Street Journal, “Traditional soft good categories posted decent performance, including apparel (+2.4 percent), sporting goods (+2.3 percent), and so-called general merchandise (1.6 percent). That fact is giving us greater optimism about the health of the retail sector, which is increasingly likely to have a decent holiday season, especially on a year-over-year comparison.”
