Recession Not Yet: Retail Sales Help Push Up Atlanta Fed GDPNow to +3.0% for Q3 GDP

By Wolf Richter for WOLF STREET

As retail sales rose despite dropping prices of goods, inflation-adjusted retail sales – adjusted for this deflation in goods – rose even faster: hence the jump in GDPNow.

Retail sales rose 0.1% in August from July, seasonally adjusted, on top of the upwardly revised 1.1% jump in July, and the 0.3% dip in June. Not seasonally adjusted, retail sales jumped by 1.5% in August from July to $737 billion.

To iron out the month-to-month squiggles and revisions, we like to look at the three-month average (chart below), which rose 0.3% month-to-month and 2.3% year-over-year. The biggest gainer was ecommerce, the second-largest retailer category behind auto dealers: +1.4% month-to-month, +7.8% year-over-year.

What is remarkable is that retail sales continue to rise even as prices of many goods that retailers sell, have been dropping all year, particularly durable goods and gasoline. When prices drop and consumers buy the same amount of stuff, retail sales in dollars would decline with prices (and we see that with gasoline where dollar-sales track gasoline prices lower).

But retail sales have risen despite price declines in goods that retailers sell, which shows that consumers are buying a lot more stuff, particularly durable goods.