The vast majority of US output, approximately 70%, is consumed within the domestic market. As a consequence, retail sales levels represent a key barometer of the state of the world’s largest economy and will be a factor considered when the Federal Reserve meets (today and tomorrow) to set interest rates.
Figures released by the US Commerce Department show that retail sales picked up by a modest 0.2% in August, but core sales (which excludes items such as new cars, petrol, building materials and expenditure in restaurants) improved by 0.4%. The data comes hard on the heels of a disappointing figure for job creation last month which came in well below analysts’ expectations.
Sales of new cars accounted for almost a fifth of retail sales, reflecting the idea that Americans are replacing older vehicles that they had hung onto during bleaker periods for the economy in recent years. Car sales and car component sales have seen a 5.7% rise over the past year. This year has seen the creation of approximately 2.9 million jobs to date. Partially, this may explain an 8.2% increase in sales at bars and restaurants as people are more confident about employment prospects (and cheaper oil prices continue to feed into the economy). August sae a 0.7% rise in sales within the sector and some 372000 new jobs have been created over the last 12 months to meet increased demand.
However, factory output slipped by 0.5% last month with, ironically, a decline in car production, following a 0.9% spike in July. If car production data is stripped out then manufacturing output was unchanged since July.
A stronger Dollar has been blamed for dampening US exports and the Fed will be conscious of the fact that an increase in interest rates above their near-zero level will strengthen the Dollar, at least in the short term.