Consumers spent less in August relative to July, according to monthly retail and foodservice data released by the U.S. Department of Commerce and Census Bureau.
In July, monthly sales reached $534.6 billion, a 0.9 percent increase from the previous month, which the Census revised from a more optimistic 1.2 percent.
Now, the Census Bureau reports a modest 0.6 percent increase between July and August, with nominal consumer spending at $537.5 billion.
Estimated retail sales were up from last month by 0.1 percent, and up 5.1 percent over the previous year. Non-store retailers were up a whopping 22.4 percent with more people shopping online, while clothing and clothing accessory stores were down a significant 20.4 percent from last year.
CNN Business reports that the 0.6 percent increase in August did not meet estimates set by economists in a survey from Refinitv, which predicted a one percent gain.
Analysts and economists, including Federal Reserve Chairman Jerome Powell, predicted slow growth in the coming months if Congress and the federal government could not reach an agreement for additional fiscal stimulus after the CARES Act unemployment benefits ended last month.
“A partial relapse [in retail sales] is likely over the next couple of months as people who have been receiving enhanced unemployment benefits…cut their spending,” Ian Shepherdson, an economist at Pantheon Macroeconomics, said in a research report Tuesday. “The income hit from the benefit cut-off is too big for people to ignore.”
The CARES Act has provided a one-time $1,200 stimulus check to most Americans and an additional $600 per month in unemployment benefits. The stimulus package also included aid in the form of grants and loans to the struggling airline industry. Without a new relief package, the airlines are looking to reduce flights further and cut as many as 70,000 jobs.
Interestingly, consumer prices continue to increase, despite a lack of confidence and retail spending. Still, those increases were driven by used car sales, which saw low prices over the summer, and grocery store prices, which have continued to rise.
Restaurant sales climbed higher through August compared to last month, as more restaurants continue to re-open.
“The hard-hit restaurant industry continues to recover,” economists at Citi said in a research report Wednesday.
Although signs show a slowdown in some areas, some economists argue that the economy has fared better than predicted. This could be one reason Congress has been slow to pass a CARES Act 2.0 and could allow the private sector to bounce back slowly.
“As the private economy gets up, back and running, you would expect to see less fiscal spending anyway,” Paul Ashworth, an analyst at Capital Economics, told the Financial Times. “These were emergency measures, and now we’re in less of an emergency situation.”
However, the overwhelming consensus from economists lies in a push for some form of additional help for consumers.
“People can see with their own eyes that the economy is not motoring along,” said Shepherdson. “It’s very hard to see how taking away the single biggest support for personal incomes can do anything other than depress growth.”