Retail Sales Climb! Growing Economy or Selective Spending?

In hindsight, August is shaping up to be a pretty great month. First, automakers saw incredible sales numbers at home and abroad. Now, it looks like retail sales grew by 0.9 percent in the month. The growth is attributed to higher gas prices, which jumped 5.5 percent, and the strong auto sales. Outside of these categories, sales only rose 0.1 percent. However, Target (NYSE:TGT), Macy’s (NYSE:M), and Gap (NYSE:GPS) all reported a bump in back-to-school sales.

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Even with QE3 coming into effect and a surge in the markets yesterday, Russell Price, senior economist at Ameriprise Financial, is wary. “We may get some temporary spurts of spending, some positive numbers,” he said, “but they can’t be viewed as sustainable. The income side of the equation is very weak.”

Price’s comments echo a report from the Labor Department that showed a 0.7 percent drop in average hourly earnings (adjusted for inflation), the largest since 2009. The most recent jobs report was low, as well. Gas prices are expected to remain high for the coming weeks.

Consumer spending moves between 60 and 70 percent of the economy, and everybody’s financial belt is tight right now. These retail sales numbers could be seen as a positive growth, or as selective spending as consumers prioritize where their dollars go.
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