U.S. retail sales unexpectedly rose in August by 2.1 percent year-on-year, suggesting that the economy remained resilient through much of the third quarter. Retail sales increased 0.1 percent month-on-month after an upwardly revised 1.1 percent surge in July, the Commerce Department’s Census Bureau recently revealed.
Online store sales rebounded 1.4 percent after falling 0.4 percent in July. However, sales at gasoline stations declined 1.2 percent, reflecting lower gas prices.
U.S. retail sales at sporting goods, hobby, musical instrument and bookstores increased 0.3 percent. In addition, building material and garden equipment store sales rose 0.1 percent.
However, retail sales across the food and beverage sector remained steady after rising 0.2 percent in July.
Stronger U.S. retail sales in addition to the decline in unemployment last month have decreased the expectations of a 50-basis-point rate cut by the Federal Reserve. The unemployment rate declined to 4.2 percent in August. This came after four straight monthly increases to almost a three-year high of 4.3 percent in July
Ahead of the Fed’s policy decision, markets saw a 63 percent chance of a 50 basis points rate cut and a 37 percent chance of a 25-basis-point cut, according to the CME FedWatch Tool.
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The U.S. central bank has maintained its benchmark overnight interest rate in the current 5.25-5.50 percent range for over a year, after raising it by 525 basis points in 2022 and 2023.
Most economists expect the central bank to cut interest rates by 25 basis points on Wednesday. They also noted that the economic conditions do not warrant a half-percentage-point reduction that financial markets expect.
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