Retail Sales Rise More Than Expected In August Amid Jump In Auto Sales

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With the government's cash-for-clunkers program contributing to a substantial increase in auto sales, the Commerce Department released a report Tuesday morning showing that retail sales increased by much more than expected in the month of August.

The report showed that retail sales jumped 2.7 percent in August following a revised 0.2 percent decrease in July. Economists had been expecting a more modest increase in sales of about 1.9 percent compared to the 0.1 percent drop originally reported for the previous month.

While retail sales were still down 5.3 percent compared to the same month a year ago, the monthly increase in sales marked the fastest pace of sales growth since January of 2006.

A significant increase in auto sales contributed to the sales growth, with sales by motor vehicle and parts dealers surging up 10.6 percent in August after increasing by 1.5 percent in July.

Excluding the sharp rise in auto sales, retail sales still increased by 1.1 percent in August compared to a revised 0.5 percent drop in the previous month. The growth in ex-auto sales exceeded economist estimates of a 0.4 percent increase.

Peter Boockvar, equity strategist for Miller Tabak, said that the increase in ex-auto sales was a pleasant surprise, as there had been concerns that the cash-for-clunkers program would steal sales from other categories.

However, Boockvar noted that there were tax holidays and the Labor Day calendar shift that helped to boost sales.

"With the clunker plan now over, we'll see what impact overall it will have in the September data next month," he said.

The increase in ex-auto sales was partly due to a 5.1 percent increase in sales by gas stations, which reflected recent increases in gas prices. Excluding both auto and gas station sales, retail sales still increased by 0.6 percent in August.

Department stores, clothing and accessories stores, and sporting goods, hobby, book and music stores all reported sales growth in excess of 2 percent.

At the same time, the report showed that sales by furniture and home furnishings stores and building materials and supplies dealers fell by 1.6 percent and 1.2 percent, respectively.

With the government's cash-for-clunkers program contributing to a substantial increase in auto sales, the Commerce Department released a report Tuesday morning showing that retail sales increased by much more than expected in the month of August. The report showed that retail sales jumped 2.7 percent in August following a revised 0.2 percent decrease in July. Economists had been expecting a more modest increase in sales of about 1.9 percent. (Market News Provided by RTTNews)