US retail sales smashed expectations last month, boosting confidence in the American economy’s recovery from the Covid crisis even amid a surge in cases driven by the Delta variant.
Retail sales jumped 0.7 per cent in August, up sharply from 1.8 per cent in the previous month, according to fresh figures published by the US Commerce Department.
Economists polled by Reuters had expected retail sales to dip 0.8 per cent.
The unexpected rise in sales was partly driven by Americans’ household incomes rising in recent months as the economic recovery has progressed.
A rebounding jobs market has encouraged spending, while households likely drew on savings accumulated over the course of the pandemic to buy goods, according to analysts at ING.
Retail sales in America are now 17.4 per cent higher than pre-Covid levels, with August’s bump led by a 5.3 per cent increase in spending at non-store (online) retailers.
The rapid spread of new Covid cases across US states driven by the more transmissible Delta variant had put downward pressure on consumer confidence.
However, an increase in average household income and improvements in the labour market have strengthened confidence in personal finances, prompting an uptick in spending.
James Knightley, chief international economist at ING, said: “With the economy reopening, there are a greater number of options on which to spend money than 12 months ago.”
“Consumer finances remain in good shape with incomes picking up thanks to rising employment and wages.”
“Early numbers for September suggest we may be seeing a peaking out in Covid cases and there is evidence to suggest at least a stabilisation and, in some instance, a re-strengthening in activity around air passenger numbers and restaurant dining. Consequently, we remain upbeat on consumer activity in [the] fourth quarter and through 2022.”