U.S. Retail Sales Jump in August on Strong Back-to-School Spending

U.S. retail sales unexpectedly jumped in August, driven by a robust back-to-school season that lifted spending across a range of discretionary categories, the Commerce Department said Tuesday. Excluding auto sales, retail receipts rose 0.7 percent from July, well above economists' estimates of a 0.4 percent gain; overall retail sales increased 0.6 percent.

The uptick defied forecasts of a spending slump amid slower hiring and rising inflation, and underscored the uneven impact of higher prices and tariffs on different consumer groups. Policymakers at the Federal Reserve are weighing a decision this week, with traders pricing in a 100 percent probability that the Fed will deliver at least a quarter-point rate cut at its meeting, according to CME FedWatch.

Nine of 13 retail categories posted increases in August, led by online retailers, clothing stores and sporting goods outlets as families bought apparel, backpacks and school supplies. Clothing and accessories spending rose 1.0 percent from July, while purchases at sporting goods, bookstore and musical instrument retailers climbed 0.8 percent.

Bill Adams, chief economist at Comerica, said the gains did not reflect a uniform recovery. "Tariff costs and inflation are big concerns for lower and middle-income consumers; the weakness of grocery sales is probably a sign that these consumer groups are retrenching," he wrote in a note Tuesday. "But affluent consumers are in better shape, and likely fueled the outperformance of overall retail sales and more discretionary categories in August."

The report showed pockets of strain in tariff-sensitive categories. Motor vehicle sales increased at a much slower pace than in July, a trend analysts link to tariffs on imported cars and auto parts. Those tariffs have pushed some buyers toward the used-car market, where prices have risen as shoppers look for lower-cost alternatives. Furniture sales fell 0.3 percent in August, while building materials, garden equipment and supplies inched up 0.1 percent but remained 2.3 percent below year-ago levels as homeowners hesitate on remodeling amid a softer housing market.

Grocery-store sales rose 0.3 percent from July, a pace that lagged inflation in the food-at-home category, suggesting that households are absorbing higher prices rather than increasing quantity purchased. Overall wage growth has cooled, though many workers still saw pay gains outpacing inflation, and wealthier consumers have benefited from a record-setting stock market rally that has supported discretionary spending.

U.S. equities moved modestly after the retail data as investors assessed the economic backdrop ahead of the Fed meeting. The Dow Jones Industrial Average slipped 0.2 percent, the S&P 500 fell less than 0.1 percent and the Nasdaq was up slightly by about 3 p.m. Eastern.

Economists said the report complicates the Fed's calculus. On one hand, stronger retail receipts and persistent inflation in some categories could argue for a more gradual approach to easing monetary policy. On the other, signs of a cooling labor market and slowing wage growth support the view that a rate cut could help sustain growth. The Fed has not cut interest rates since December 2024.

Retail-sector detail showed a split between staples and discretionary spending that reflects income and wealth differences across the population. Analysts cautioned that monthly retail data are volatile and often revised, but the upside surprise for August adds to evidence that consumer spending remains a key pillar of the economy even as headwinds from tariffs and inflation weigh on specific sectors.

The Commerce Department's report will be followed by other economic releases this week that market participants and policymakers will use to assess the timing and size of any upcoming policy moves. For now, the August retail surge points to resilient demand among some households and highlights how distributional effects—by income, region and industry—are shaping the broader recovery.