Sales at grocery stores stayed on a growth path in August even as declining inflation nipped at overall U.S. retail sales numbers.
In August, retail and foodservice sales ticked up 0.6% to $697.56 billion (seasonally adjusted) from $693.67 billion in revised data for July and rose 2.6% from updated figures for August 2022, the U.S. Census Bureau reported in advance estimates on Thursday.
Retail trade sales—excluding motor vehicles, parts stores, gas stations and repair shops—generated the same sequential gain but a smaller annual uptick, growing by 0.6% month over month to $606.79 billion (seasonally adjusted) and by 1.6% over 12 months.
The August results compared with downward-revised increases of 0.5% monthly and 2.6% annually for July retail and foodservice sales and 0.4% monthly and 1.5% year over year for July retail trade sales.
Grocery retail sales edged up 0.4% to $73.93 billion (seasonally adjusted) in August from $73.64 billion in downward revised numbers for July, when sales advanced 0.7% sequentially, according to the Census Bureau. August grocery store sales climbed 2.1% from a year ago, matching the updated increase for July.
Sales at all food and beverage stores in August reflected the gains in grocery, up 0.4% monthly to $82.03 billion from $81.46 billion in July and rising 2.1% over 12 months. The Census Bureau’s downward-adjusted data for July showed gains of 0.7% month to month and 2.3% year over year for the retail segment.
The inflation effect
Retail industry observers noted how the latest inflation levels cast a shadow on August’s retail sales uptick.
“While the August retail sales report shows positive momentum in consumer spending, it was largely driven by gas price inflation,” Kayla Bruun, economic analyst at data intelligence firm Morning Consult, said in an email on Thursday. “Consumers’ inflation concerns were moderating for the last few months, but we saw an uptick in early September as core inflation remains sticky. This has a big impact on retailers, as coupons and sales prove particularly effective to motivate shoppers. The apparel sector performed notably well last month, up 0.9% from July, getting a boost from back-to-school and Gen Z’s early holiday shopping.”
On Wednesday, the U.S. Bureau of Labor Statistics reported that the August Consumer Price Index rose 3.7% (unadjusted) year over year, above a 3.2% uptick in July. That marked two months of annual gains in inflation after 12 months of yearly decreases, according to BLS data. On a monthly basis, the August CPI increased just 0.6% (seasonally adjusted), yet that was higher than the 0.2% gain in both July and June.
“Retail sales for August beat expectations, but growth was weaker than the previous month after adjusting for inflation. Morning Consult’s spending data shows a similar story, with younger and higher-income consumers pulling back on purchases for many of the same goods and services that registered increases in July,” explained Claire Tassin, retail and e-commerce analyst at Morning Consult. “Despite the Fed’s progress this year to tame inflation, consumers remain price-conscious, and higher gas prices, elevated interest rates and the resumption of student debt payments are likely to add to household financial pressures this fall.”
The food CPI—including food-at-home and food-away-from-home—mostly held steady in August, up 4.3% year over year versus a 4.9% annual increase for July. August’s food index repeated the 0.2% monthly gain in July. Food-at-home prices climbed 0.2% monthly and 3% annually in August, while food-away-from-home saw inflation rise 0.3% sequentially and 6.5% on a yearly basis.
“August’s retail sales numbers were boosted by a 0.3% increase for foodservices and drinking places and 0.4% growth for motor vehicles and parts dealers. Additionally, gas prices increased throughout August, and sales grew 5.2% from the previous month. Non-store retailers, which includes e-commerce, remained unchanged from July,” noted Naveen Jaggi, president of retail advisory services at commercial real estate firm Jones Lang LaSalle (JLL). “Lastly, just as we expected last month, consumers continue to spend on clothing, restaurants, sporting goods and more, showing they are resilient despite inflation rates.”
Consumers pressured but still spending
The National Retail Federation (NRF) on Thursday pegged U.S. retail sales as virtually flat for August, up just 0.1% (seasonally adjusted) from July, and rising 3.3% (adjusted) from August 2022. That compared with the retail trade group’s downward-revised figures of 0.7% monthly and 3.3% annual gains for July.
NRF’s estimate focuses on core retail, excluding automobile dealers, gas stations and restaurants.
“NRF’s numbers show the pace of retail growth cooled from July but that consumers are still active, even as they continue to be selective and price-sensitive,” NRF Chief Economist Jack Kleinhenz said in a statement. “Households have the capacity to spend, but momentum is slowing, in part because savings built up during the pandemic are running lower and credit costs are rising. Consumer spending growth has slowed but there is little hint of any sudden collapse.”
As in the previous month, five of nine retail categories tracked by NRF generated 12-month sales increases in August, including grocery and beverage stores, health and personal care stores (including drug stores), general merchandise stores, online stores, and apparel and accessories stores, with gains running between 2.5% and 8%. Sales declined on a yearly basis at sporting goods stores, electronics and appliance stores, building materials and garden supply stores, and furniture and home furnishing stores, with decrease ranging between 1.5% and 8%.
Sequentially, August retail sales grew in six segments: grocery and beverage stores, health and personal care stores (including drug stores), general merchandise stores, apparel and accessories stores, electronics and appliance stores, and building materials and garden supply stores, which posted gains of between 0.1% to 0.9%. Online store sales were flat month to month. Only sporting goods (-1.6%) and furniture and home furnishings stores (-1%) saw monthly sales declines in August.
Grocery and beverage store sales inched up 0.4% month to month seasonally adjusted in August and 2.8% unadjusted annually, NRF said. Among other retail categories in the food, drug and mass channel, August sales rose 0.5% month over month seasonally adjusted and surged 7.8% unadjusted year over year for health and personal care stores (including drug stores), while general merchandise stores tallied gains of 0.3% month over month seasonally adjusted and a 3% unadjusted year over year.
“August retail sales show that consumers remain steadfast in the face of continued inflation and higher interest rates,” NRF President and CEO Matthew Shay observed. “Consumers are focused on household priorities, as evident by spending this back-to-school season. Entering the fall, we expect moderate growth to continue despite uncertainties like the direction of inflation and interest rates as well as a potential government shutdown.”