After reporting a steep drop in U.S. retail sales in the previous month, the Commerce Department released a report on Thursday showing retail sales unexpectedly rebounded in the month of August.

The Commerce Department said retail sales climbed by 0.7 percent in August after plunging by a revised 1.8 percent in July.

The rebound surprised economists, who had expected retail sales to decrease by another 0.8 percent compared to the 1.1 percent slump originally reported for the previous month.

The unexpected increase in retail sales came despite a continued nosedive in sales by motor vehicle and parts dealers, which tumbled by 3.6 percent in August after plummeting by 4.6 percent in July.

Excluding sales by motor vehicle and parts dealers, retail sales surged up by 1.8 percent in August after falling by a revised 1.0 percent in July.

Economists had expected ex-auto sales to edge down by 0.2 percent compared to the 0.4 percent drop originally reported for the previous month.

The jump in ex-auto sales in August was partly due to a 5.3 percent spike in sales by non-store retailers, which rebounded after plunging by 4.6 percent in July.


Sales by furniture and home furnishings stores, general merchandise stores and grocery stores also saw significant growth, while sales by electronics and appliance stores and sporting goods, hobby, musical instrument, and book stores fell sharply.

The report also showed sales by food services and drinking places was unchanged in August after jumping by 1.3 percent in July.

"The rise in online and grocery store spending, which contrasts with stagnant spending at bars and restaurants, suggests Delta fears are playing a key role," said Michael Pearce, Senior U.S. Economist at Capital Economics.

Closely watched core retail sales, which exclude automobiles, gasoline, building materials and food services, spiked by 2.5 percent in August after tumbling by 1.9 percent in July.

"While spending on goods was much stronger than we anticipated, that presumably will just add to the shortages seen in recent months, while the flatlining of spending in restaurants and bars suggest that the broader recovery in services consumption probably faltered," said Pearce.

He added, "We calculate that real consumption rose by 0.5% last month, consistent with our existing forecasts for consumption growth of just over 2% annualized in the third quarter, with overall GDP growth slowing to 4.0%."

(Source:RTT News)