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August Retail Sales Disappoint, but Overall Trends Look Strong


By Sara B. Potter, CFA  |  September 19, 2018

On the heels of strong July spending numbers, August retail sales inched up just 0.1% from the prior month. This was the weakest monthly growth in six months. However, on a year-over-year basis the numbers look much stronger, with total retail and food service sales up 6.9% (not seasonally adjusted basis). The monthly year-over-year growth rate is the second highest we’ve seen in the past 2.5 years, just below the 7.0% we saw in May 2018. With school starting in August or early September across the U.S., how did back-to-school shopping contribute to the August retail sales numbers?

Anticipated Back-to-School Spending Down from 2017

According to the National Retail Federation’s 2018 annual back-to-school consumer survey, total back-to-school spending for grades K-12 is expected to hit $27.5 billion in 2018. This is below 2017’s $29.5 billion, but is still the third-highest total in the history of the NRF survey. According to the survey, this year consumers planned to shop across a variety of retail outlets, led by department stores, a destination for 57% of respondents.

Top Destinations for Purchasing Back-to-School Items (K-12)

Retail Type

Percent of respondents

Department Stores


Online Retailers


Discount Stores


Clothing Stores


Office Supply Stores


Source: National Retail Federation, 2018 Annual Back-to-School Survey

While the retail sales numbers show that performance was generally mixed for most of these back-to-school categories in August, we’re seeing a continuation of some of the trends that the industry has been following for some time, namely strong growth for nonstore (internet) retail and the decline of department stores. Even though consumers surveyed planned to hit department stores for their back-to-school needs, department store sales were up just 0.6% from last year and fell on a month-over-month basis in August.

Retail Sales Performance Across Back-to-School Categories

Retail Sales Category

August % m/m (SA)

July %

m/m (SA)

August %

y/y (NSA)

July %

y/y (NSA)

Total Retail & Food Services





Electronics & Appliance Stores





Clothing & Clothing Accessory Stores





Department Stores





Nonstore Retailers





Source: U.S. Census Bureau

The NRF survey also found that consumers planned to start their back-to-school shopping early. “Most back-to-school shoppers (77%) plan to start at least three weeks before school begins, up from last year’s 74% and 64% a decade ago.” This trend is supported by the monthly retail sales data. July was a strong month across most retail sales categories, so August looked weak by comparison.

That’s a look at retail sales over the summer in the context of back-to-school shopping, but which factors are influencing retail sales more broadly?

Factors Boosting Overall Retail Sales

One thing to keep in mind when looking at the published retail sales numbers is that the data is expressed in nominal terms. Therefore, increases in sales are heavily influenced by price changes, a fact especially true for gasoline and food sales, which can swing dramatically with price movements in their respective markets. Oil prices are up 41% year-over-year and have a major influence on the overall increase in retail sales expenditures. Rising fuel prices are just part of the story, however, as both overall and core inflation (excluding the volatile food and energy components) have been on the rise in recent months. On a year-over-year basis, total CPI inflation has averaged 2.8% over the last four months, while core CPI has remained above 2.0% for the last six months. This tells us that we should also look at real retail sales to remove the impact of general price inflation. After adjusting for inflation using total CPI, retail sales fell 0.14% in August compared to July, but the real year-over-year growth rate was still strong at 4.15%.

Real retail sales

Prices are going up, but the fact is that consumers have more money to spend. Unemployment is at 18-year lows, and because of the tax cut passed in December 2017, consumers are seeing higher take-home pay. We can see this in the per capita disposable income data, which was up 4.6% year-over-year in July. Interestingly, even as disposable personal income has risen, consumers are still taking on more credit card debt. Credit card balances have jumped back to levels seen in 2007, just before the recession. With interest rates on the rise, this could be a cause for concern in the coming quarters.

Per capital disposable personal income

Where are consumers spending their new-found income? While higher gasoline prices are consuming a substantial portion of the tax gains (spending up 20.3% in August year-over-year), consumers are also eating out more, pushing retail sales at food services and drinking places up 11.3% year-over-year. The other retail sector that has benefited has been clothing and accessories. In August, retail sales at clothing and clothing accessory stores jumped 6.2% year-over-year; year-to-date, monthly gains have averaged 5.5%, the kind of growth rates we haven’t seen since 2011/12, when the country was in early days of the post-recession expansion.

Retail sales clothing


Consumers are feeling good right now, with more money in their pockets to spend. While higher fuel prices are eating up part of their extra income, consumers are still able to spend more on discretionary items such as clothes and meals at restaurants. This may have fed into higher back-to-school spending, and the data suggests that consumers made these purchases early this year, leading to strong July retail sales numbers followed by a weak August.

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Sara Potter, CFA

VP, Associate Director, Thought Leadership and Insights

Sara Potter joined FactSet in 1999 and is based in Norwalk. She is responsible for developing applications that facilitate the analysis of global markets at a macro level, highlighting FactSet’s vast benchmark and economic content sets. Sara has also managed the economic database development team where she was responsible for the integration of third-party economic content as well as the development of FactSet Economics data. Sara earned a M.A. in International Economics and Finance from Brandeis University and holds a B.A. in Economics and French from Dartmouth College. She is a CFA charterholder.