Americans are still spending: Retail sales are strong for third month in a row

Retail sales rose for the third straight month in August, as spending at US retailers increased 0.6% last month, the Commerce Department reported. The jump exceeds analysts’ expectations of 0.2%.

Back-to-school shopping helped drive the increase, even as tariffs pushed up prices and slowed job growth.

Shoppers spread their spending across many categories. Online sales jumped 2%, clothing sales rose 1%, and restaurants gained 0.7%. 

Electronics stores were up 0.3%, while auto dealers saw a 0.5% boost.

Furniture sales, however, slipped 0.3%. 

Price rise 
At the same time, inflation is on the rise. Prices increased 0.4% from July to August and are now 2.9% higher than a year ago—the biggest jump since January. Core prices, which exclude food and energy, rose 3.1%, well above the Federal Reserve’s 2% target.

The mixed picture—strong sales along with higher inflation and weaker job growth—creates challenges for the economy. Employers added just 22,000 jobs in August, far fewer than expected. Meanwhile, high earners (who come in the top 10% income bracket) accounted for 49.2% of total spending in Q2 as they continue to benefit from soaring stock prices.

Economists believe that though consumer spending seems strong right now, it may not continue. They further say that solid gains in sales are unlikely to prevent the Federal Reserve from cutting interest rates on Wednesday, given the widening cracks in the labor market.