August Retail Sales Beat Forecasts with 0.6 Percent Increase

‘This is further evidence that we shouldn’t underestimate the strength of the consumer,’ says Bankrate’s Ted Rossman.

People shop at the Mall of America in Bloomington, Minn., on Aug. 29, 2025. Madalina Kilroy/The Epoch Times

U.S. shoppers opened their wallets for the third consecutive month, shrugging off concerns about tariffs and the broader economy.

Retail sales increased by 0.6 percent in August, according to Department of Commerce data released on Sept. 16.

Markets had penciled in a smaller 0.2 percent gain. Retail sales are seasonally adjusted, but do not account for inflation.

The better-than-expected numbers were driven by larger increases at digital retailers (2 percent) and apparel stores (1 percent). Gas stations and car dealers each recorded a 0.5 jump in transactions.

Retail sales excluding automobiles and gasoline advanced by 0.7 percent, from an upwardly revised 0.3 percent in July.

The retail sales control group—a refined subset of indicators that omit auto dealers, building materials, gas stations, and other categories—increased by 0.7 percent, surpassing the consensus estimate of 0.4 percent.

Economists pay close attention to this gauge because it contributes to the goods spending in the quarterly gross domestic product and feeds into the personal consumption expenditure figures.

“This is further evidence that we shouldn’t underestimate the strength of the consumer,” Ted Rossman, senior industry analyst at Bankrate, said in a statement to The Epoch Times.

“Back-to-school shopping was a key theme in August, as evidenced by the strong clothing and electronics sales. We can also infer a continued tariff pull-forward effect in the strong car and furniture sales numbers.”

At the same time, last month’s solid data may have been surprising in light of other metrics.

Numbers compiled by Torsten Slok, chief economist at Apollo Wealth Management, show growth in daily consumer spending has slowed in recent weeks. In addition, the slowdown was “more pronounced in sectors impacted by tariffs,” such as digital retailers, motor vehicle and parts dealers, and clothing stores.

Still, consumers continue to spend despite growing consternation surrounding inflation, the labor market, and broader economic conditions.

The University of Michigan’s September Consumer Sentiment Index posted the second straight monthly decline and came in below the market consensus. The indexes for current conditions and expectations also slumped.

Consumers cited tariffs as a key driver of their mounting concerns about business conditions, inflation, and job prospects. However, sentiment remains firmly above the April and May peak of uncertainty.

The year-ahead inflation outlook was flat at 4.8 percent, while the five-year horizon jumped to 3.9 percent from 3.5 percent.

“Even as the job market has weakened, consumers are still spending aggressively,” Rossman said.

In August, the U.S. economy created 22,000 new jobs, which was smaller than expected. In addition, the latest initial jobless claims—the number of Americans filing new applications for unemployment benefits—climbed to a four-year high of 263,000.

But worries about the national labor market could be overblown, says Paul Ashworth, chief North America economist at Capital Economics.

The Bureau of Labor Statistics’ annual benchmark revisions showed payroll growth being overestimated by 911,000 between March 2024 and March 2025. While this suggests the labor market had been slowing well before President Donald Trump’s global tariffs, growth prospects have remained intact, Ashworth notes.

“At the same time, however, GDP growth suggests the economy is doing just fine, with the coming downward revision to employment mechanically implying that productivity growth was even stronger,” he said in a Sept. 11 note.

In the second quarter, the U.S. economy rebounded by 3.3 percent, following a 0.5 percent contraction at the start of the year. The Federal Reserve Bank of Atlanta’s GDPNow Model estimates a 3.1 percent growth rate in the third quarter.

Santa Claus Is Coming to Town

The holiday shopping season is still weeks away, but a chorus of economic observers is analyzing the data to gauge consumers’ appetite for annual gift-giving.

Views are mixed on whether households will be visiting shopping malls or their preferred online retail platforms.

According to Bankrate’s 2025 Holiday Spending Report, released earlier this month, nearly half of Christmas shoppers (49 percent) have already started or plan to begin shopping before Oct. 31. Forty-one percent also say they expect gifts will be costlier this year.

But while shoppers might have already captured the magical spirit, consumers may not be spending as much as they have in recent years.

Recent data from PwC’s 2025 Holiday Outlook survey indicates that consumers anticipate their seasonal spending to decline by an average of 5 percent compared to last year.

“Consumers are expecting financial pressures from tariffs and are worrying about job security,” Bill Adams, chief economist for Comerica Bank, said in a note emailed to The Epoch Times.

“Consumer sentiment will probably be a drag on holiday spending this year.”

Rossman, however, believes there will be plenty of presents under the Christmas tree in December.

“The holiday shopping season is right around the corner—by the end of this month, a quarter of holiday shoppers are expected to begin making purchases—and early signs are that Santa’s sleigh will be pretty full this year,” he said.