The pace of growth in U.S. retail sales slowed again last month, the Census Bureau reports. For the second month in a row, consumer spending on retail goods and services expanded at a lesser rate, rising a modest 0.2% in August vs. the previous month. That's the smallest rise since April. On the other hand, retail spending still managed to increase for the fifth consecutive month. It's been two years since the previous run of five straight monthly gains. Nonetheless, the advance has turned sluggish lately, raising questions about the future.
It seems that the headwinds of higher payroll taxes, a still-moderate rise in the number of new jobs, and weak income growth are taking a toll. "The consumer economy is growing reluctantly," according to Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott. "Income growth just isn't there to support a much faster pace of spending. There's no stability."
Whatever the implications in the August slowdown, the year-over-year comparison still looks decent relative to recent history. Retail sales increased 4.7% last month vs. the year-earlier level. That's well below July's pace, but it matches the average of the year-over-year gains posted in each of the past 12 months (+4.7%) through July. Yes, if the trend continues to slide in the months ahead we'll have a genuine sign of trouble with regards to evaluating the business cycle's outlook. But for now, it's not obvious that today's news is anything more than the normal ebb and flow of volatility for this series.
Nonetheless, keeping an eye on spending habits is on the short list of macro chores these days, and not necessarily for positive reasons. As yesterday's weekly update of the Bloomberg Consumer Comfort Index reminds, the outlook on economic conditions among Americans has tumbled lately. The good news is that this index appears to be stabilizing after last month's correction. Is that a sign that something comparable is in the cards for retail spending in the months ahead?