US retail sales continue to grow in the economy

Retail sales rose 0.1% from July to August, according to the Commerce Department.

This modest increase follows a larger increase last month, which marked the highest rate of retail sales growth in a year and a half.

The data suggests that Americans continue to spend more money at retailers, providing little boost to the economy as the Federal Reserve weighs the next step in interest rate cuts.

Online retailers, sporting goods stores, and home and garden stores all reported strong sales during the period.

Average incomes, especially for low-income Americans, have risen significantly since the pandemic, allowing many to keep spending even as consumer prices rise.

However, inflation is showing signs of slowing, hitting a three-year low of 2.5% last month.

Inflation and consumer spending have become key issues in the 2024 presidential race.

Former President Donald Trump blamed the Biden-Harris administration for rising prices after the pandemic, while Vice President Kamala Harris criticized Trump’s proposal to impose tariffs of 10% to 20% on all imports, call it the “Trump tax”. it would raise prices.

Although the unemployment rate has fallen and hiring has slowed, consumer spending remains strong.

The Atlanta Federal Reserve estimates the US economy grew by 2.5% in the third quarter.

“While consumption is healthy, for now, fears of a recession seem strong,” said Olivia Cross, North America economist at Capital Economics.

The Federal Reserve can continue to stimulate the economy by reducing borrowing costs.

Economists expect the Fed to cut its key interest rate in future meetings, including a possible cut on Wednesday.

Such reductions would reduce interest rates on mortgages, auto loans and credit cards over time.

Meanwhile, interest rates have begun to fall in anticipation of the Fed’s actions.

However, rising credit card debt and declining savings rates are signs that consumers are under financial pressure, which could reduce spending in the coming months.

Kamie Meeks, a 22-year-old college student in New York City, said inflation has pushed her to look for cheaper options.

“It’s easy to find deals online,” he said, noting that he shops at discount stores like Aldi, Walmart and Chinese platforms like Shein and Temu.

Retail sales data for August show a mixed picture.

Online retailers saw a 1.4% drop in sales, while health and personal care stores saw a 0.7% increase.

However, spending in restaurants and bars remained flat, indicating that consumers may be cutting back on discretionary spending.

Gas stations reported a 1.2% drop in sales, mainly due to lower gas prices, and car sales were down slightly.

When the Fed meets to decide on a rate cut, Wall Street is betting on a halving from the current 5.3%, the highest level in 23 years.

Some policymakers may be reluctant to cut rates quickly, given the latest 2.5% rate.

However, many economists argue that with inflation moving towards the Fed’s 2% target, there is little need to keep rates high.

Another factor that contributed to the fall in inflation was the reluctance of consumers to pay higher prices for everyday goods.

Many consumers have turned to shopping, looking for bargains, or turning to discount retailers.

As a result, companies like Target, fast food chains, and packaged food manufacturers have lowered prices or offered discounts to attract cost-conscious consumers.

This article includes a report from The Associated Press