After the discount extravaganza of July, August was a much more normalized month for US retail. However, consumers continued to spend and produced a 3.5 per cent lift in overall sales.
This is a solid enough result, although a lot of it was driven by inflation – especially as discounting was neither as wide nor deep as it was in July. Underlying volumes rose by a relatively shallow 0.4 per cent, which is a marked deterioration from the 1.4 per cent volume increase produced last month.
Core retail – which excludes gasoline, autos, and foodservice – grew by 3.6 per cent or by 0.6 per cent in volume terms. Here, back-to-school helped to drive some of the solid numbers, especially in terms of apparel. However, a lot of spending was made in the prior month, which meant that August punched slightly below its average weight for back-to-school spending.
Both the overall and core numbers are respectable and show little sign of a consumer in major distress. However, the volume numbers and some of the underlying metrics we track – such as shopping around and consideration times – do indicate that greater caution is starting to come through and that consumers are being very considered and deliberate about their spending. This is one of the reasons why non-store sales did so well this month, with an 8.2 per cent increase: Online is a very convenient tool for price and product comparisons, and consumers are using it to get more bang for their buck. Of course, the halo effect from last month’s various online deals and discount days also helped to nudge consumers onto the web.
On a category basis, apparel stores put in a good performance with a 7.6 per cent lift in sales. Impressively, about 5.2 per cent of this was volume, helped by consumers treating themselves and a strong performance in some back-to-school categories. While like-for-like inflation for apparel was quite moderate during the month, there was quite a lot of trading up and indulgent purchases, which meant average unit values came in higher than last year. This underscores the fact that if the product is right and is desirable, consumers will open their wallets and purses. While it is unlikely that apparel will continue to grow at this pace for the remainder of the year, the past couple of months have provided a much-needed windfall for the sector.
At home furnishings stores, sales grew by 2.9 per cent. This was a distinct slowdown from the previous month, largely thanks to a lot of consumers having taken advantage of bargains and deals on various home items during the sale period. Even so, the positive number continues to indicate that the homewares market has come off its nadir and is now in a phase of modest expansion. That said, the consumer is still concerned about tariffs and is pulling forward some spending. This could prove to be prudent given that special tariffs for furniture have been the subject of recent policy discussions at the White House.
Home improvement stores saw sales decline by 5.7 per cent over the prior year, and this comes off the back of a very weak performance in 2024. While there was a spike in late gardening activity, core DIY tasks were largely off the agenda for most consumers. This is both a matter of wanting to save money during a period of elevated spending on travel and back-to-school, and of a lack of time in what was a busy month. As the fall and winter months arrive, the spending declines should at least moderate slightly.
At food and beverage stores, sales rose by 2.7 per cent with underlying volumes flat. Food continues to be a major source of concern in terms of prices, and some recent upward price movements could spook consumers if they accelerate into the final quarter of the year.
Overall, the outlook for the holidays remains positive. We do not believe that 2025 will be a stellar year for holiday spending, but there will be growth, and consumers will turn up at the retailers that make the effort.
