Global Economy Briefs

August retail sales continued to improve despite Delta variant

September 16, 2021

Retail spending in August surprised to the upside suggesting continued resiliency in consumption despite the COVID-19 Delta variant. Retail and food services sales rose $4.3 billion to $618.7 billion for the month – up 0.7 percent from the previous month and up 15.1 percent from a year earlier. In real terms, sales were up 0.4 percent month-over-month, demonstrating that these improvements were not merely a function of rising prices. While a number of industries do appear to be grappling with the impact of this new wave of infections, the overall takeaway of these August data is that a consumption-driven economic rebound is likely to continue despite the challenges associated with the ongoing pandemic.

Spending on goods was the primary driver of strength in August. While spending on motor vehicles and parts did suffer for the month due to supply chain disruptions, retail sales excluding this category grew a robust 1.8 percent.  Retail control, which excludes motor vehicles, gasoline, and building supplies rose an even stronger 2.5 percent from the previous month. Consumers also appear to have pivoted back toward spending at nonstore retailers, like Amazon, perhaps out of an abundance of caution over the virus.

Meanwhile, spending on in-person services was flat. Following several months of robust growth, spending at food services and drinking places slowed to just 0.03 percent from a month earlier – suggesting that the pivot back to in-person services spending may have temporarily paused due to concerns about Delta. Improvement in spending at these establishments should resume as the Delta wave begins to ebb.

Overall, these data are an upside surprise. While recent data on consumer sentiment has suffered due to the spread of the Delta variant it appears that Americans continue to have an appetite to spend. If this new wave of infections is brought under control over the coming months there is good reason to be optimistic about holiday sales later this year.