U.S. "terror data" far exceeds expectations! August retail sales rose 1.2% month-over-month, the largest increase in 5 months.

U.S. retail sales posted their largest month-over-month increase in five months, with gains across a broad range of categories, showing that consumers continued to spend on the back of the stock market and employment despite rising gasoline prices and shrinking real wages. Data released on Wednesday showed that retail sales rose 1.2% month-over-month in August, far exceeding the 0.8% increase generally forecast by economists, while the July figure was revised to a 0.5% decline. Of the 13 retail categories covered in the report, 12 posted gains, including gas stations and online retailers. Back-to-school shopping likely boosted spending at department stores, while also driving purchases of clothing, sporting goods and electronics. Sales in the so-called "control group"a metric used by the government to calculate goods spending in gross domestic product (GDP)rose 1.4%, the largest increase in nearly two years. The metric excludes food services, auto dealers, building materials stores and gas stations. Sales at non-store retailers, mainly online shopping, rose 2.6% in August, the largest increase since February 2025, following a decline the previous month. This year, Amazon.com, Inc. (AMZN.US) moved its Prime Day promotional event to June from July a year earlier, a timing shift that may have distorted the data and weighed on overall retail sales in July. Gas station sales rose 3.1%. According to AAA data, the national average gasoline price remained above $4 per gallon through the end of August. Gasoline prices rose further this month to above $4.30 per gallon as wars in the Middle East and Ukraine constrained fuel supplies. The retail data also showed that sales at motor vehicle and parts dealers rose 0.6%. Industry data released earlier this month showed that auto sales rose in August to their strongest level since April 2025. Excluding autos and gasoline, retail sales also rose 1.2%. Revenue at restaurants and bars posted a strong gain of 1.2%. The food services sector is the only services category in the retail report. Because consumer spending accounts for roughly 70% of U.S. GDP, retail sales data serve as an important guide for investors in assessing the current state of the U.S. economy and the outlook for monetary policy. The latest retail sales data comes as the Federal Reserve is considering raising interest rates to curb inflationwhich has remained above the central bank's target for more than five consecutive years. At 2 a.m. Beijing time on Thursday, the Federal Reserve will release its interest rate decision and latest economic projections. Half an hour later, Fed Chair Warsh will hold a press conference. A month ago, the market put the probability of a rate hike at just 33.1%; now that figure is close to 95%, with market pricing for a hike nearly one-sided. If the Fed raises rates as expected, it would be the Fed's first rate hike in more than three years. U.S. consumer spending has remained resilient this year, helping to drive overall economic growth. Although the boost from tax refunds has faded, low unemployment and rising stock prices are still supporting households. At the same time, U.S. retailers are looking for ways to attract more discerning consumers. Walmart Inc. (WMT.US) said last month that it had cut prices on thousands of items, partly funded by tariff refunds. However, with wage growth failing to keep pace with rising prices, many Americans still face cost-of-living pressures. Compared with a year earlier, average hourly earnings adjusted for inflation fell in August for a fifth consecutive month.