For the first half of 2022, US consumers showed remarkable resilience, opening up their wallets despite inflation and higher interest rates.
But higher prices are catching up with them. Retail sales rose slightly in August, by 0.3% compared to the month prior, and dropped by 0.4% in July, according to the latest data from the US Census Bureau.
But consumers still have more money in the bank than they did prior to the pandemic and are not fully cutting back. In August, spending dropped in five out of the thirteen sectors included in the retail sales report, down from six in July.
Car spending remains strong despite Fed tightening
Spending on cars was particularly strong in August, which jumped 2.8%. That’s partly because automakers are choosing to make and sell their higher-end, more expensive models as they struggle with a chip shortage. The average new car price broke a new record in July.
There were also more cars available to buy as inventory for some brands improved in July and August, said Tom McParland, founder of Automatch Consulting, a car consulting firm. Many car buyers may not have been able to purchase their vehicles until inventory improved, bolstering consumer spending in the category for August.
Auto buying may have also gotten a boost in August from Americans scrambling to buy electric vehicles not made in North America after the Inflation Reduction Act disqualified them from tax credits.