Retail: Falling Gas Prices Helps, But Only a Little

Kiplinger’s latest forecast on retail sales and consumer spending

Shoppers with shopping cart and bags
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Falling gasoline prices helped consumers buy more gasoline and other stuff in August, adjusting for price changes. Inflation-adjusted sales were up 0.2% in August, but that followed three months of declines. Consumers have become more cautious in the current high inflation environment.

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E-commerce sales declined 0.7% after a 1.8% jump in July that was helped by the Amazon Prime Day Sale. General merchandise and clothing sales rose modestly after adjusting for inflation. Motor vehicle sales bounced back after July’s decline, but continue to be hurt by long-standing low inventory problems and high prices. Grocery sales adjusted for inflation continued to decline, also hurt by high prices.

Restaurant sales were flat after adjusting for inflation. Restaurant sales had had a strong spring as consumers enjoyed the new freedom of eating out, but inflation-adjusted sales are slowing because higher food and labor costs have forced restaurants to raise their prices.

Going forward, some sales weakness will be the result of consumers switching their buying patterns to more services. But slow economic growth may also make consumers more cautious in their spending in general. With retail inventories already at a high level, that raises the question whether there will be heavy discounting this coming holiday season.

David Payne
Staff Economist, The Kiplinger Letter
David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.