U.S. consumers unexpectedly increased spending in August, defying expectations that a softening labor market would dampen retail purchases.
Retail sales rose 0.1% in August, Commerce Department data released Tuesday showed, after an upward revision to a 1.1% increase the previous month.
While rising sales are unlikely to derail the Federal Reserve's plans to cut interest rates, it does suggest the economy is not in a downturn, making a cut somewhat less urgency.
In the federal funds futures market, traders lowered the odds that the Fed will cut rates by 50 basis points this week and increased the odds of a 25 basis point cut.
Economists had been forecasting a 0.2% decline after a preliminary estimate for July showed a 1% increase. The monthly figure is adjusted for seasonal changes but not inflation.
Sales at auto dealerships jumped 4.9% in July, after falling 0.1% the previous month due to cyber attacks.
Sales at gas stations, which are heavily influenced by fuel prices, fell 1.2%.
Excluding gas stations and auto dealerships and parts, sales increased 0.2 percent.
Online stores saw a strong increase in sales, up 1.4% from the previous month. Sales in categories including sporting goods, hobby stores and bookstores increased 0.3%. Health and personal care stores saw sales increase 0.7%. Construction and garden stores also saw sales increases.
Furniture stores, clothing stores, electronics and appliance stores, department stores and general merchandise stores saw sales declines. Restaurant and bar sales remained flat for the month.
Sales in the “control group” categories, which are reflected in GDP, rose 0.3%, as expected. The control group does not include sales at auto dealerships, building supply stores, gas stations, office supply stores, mobile home dealers or tobacco stores.
