U.S retail sales in August rose by 2.7% which was the highest in three years, as consumers ran out and took advantage of the “cash for clunkers” program. Indeed, motor vehicles sales jumped 10.6% during the month as the government stimulus program was overwhelmingly successful, leading to several car dealers exhausting their inventories.
U.S retail sales in August rose by 2.7% which was the highest in three years, as consumers ran out and took advantage of the “cash for clunkers” program. Indeed, motor vehicles sales jumped 10.6% during the month as the government stimulus program was overwhelmingly successful, leading to several car dealers exhausting their inventories. Looking at the breakdown of the report we also see that a 5.1% rise in gasoline prices contributed to the higher than expected headline reading which beat economist predictions of 1.9%. Gains in clothing, electronics and general merchandise led to a 0.6% rise in demand outside of autos and gasoline which is encouraging for domestic growth as expectations were for a flat reading. Indeed, the increase in purchases that weren’t stimulated by government programs could be a sign that Americans are starting to loosen their purse strings which is what the economy will need to have a sustainable recovery once public spending dissipates. We also saw a manufacturing activity in the New York rise to its highest level since November, 2007. However, the jump in gasoline receipts was fueled by rising prices which led to a 1.7% increase in the August producer price index which more than doubled expectations of 0.8%. Rising inflation could curb future consumer spending and jeopardize the potential for a robust recovery. The dollar found support on the back of the positive implications for the U.S. economy which is a divergence from recent price action where increasing optimism has lead to greenback weakness as safe haven flows exited positions in U.S. government bonds.
