U.S. Retail Sales Suffer Major Drop in August

us unemployment fell to 3.5%

U.S. retail sales dropped unexpectedly last month, possibly due to the Hurricane Harvey impact, on the purchase of motor vehicles, which suggests a moderate consumer spending in the third quarter.

The Commerce Department informed on Friday that retail sales fell 0.2 percent in August, the biggest drop in six months. The July data was revised and showed a rise of 0.3 percent instead of the previously reported 0.6 percent jump.

Economists polled by Reuters had forecast retail sales nudging up 0.1 percent.

Motor vehicle sales tumbled 1.6 percent last month, the biggest drop since January, after being unchanged in July. Harvey, which slammed Texas in the last week of August and unleashed unprecedented flooding in Houston, probably dented sales of automobiles.

Auto sales are, however, expected to get a boost from the replacement of flood-damaged vehicles. Overall retail sales increased 3.2 percent in August on a year-on-year basis, pointing to underlying strength in domestic demand.

The Commerce Department said while it could not isolate the impact of Harvey on retail sales, it had received indications from companies that the hurricane had “both positive and negative effects on their sales data while others indicated they were not impacted at all.”

Excluding automobiles, gasoline, building materials and food services, retail sales fell 0.2 percent last month after an unrevised 0.6 percent increase in July. These so-called core retail sales correspond most closely with the consumer spending component of the gross domestic product. Last month’s drop suggested consumer spending could slow in the July-September period.

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