Retail Sales Jump 1.2% in August, Beating Forecasts as Fed Weighs First Rate Hike Since 2023

American consumers kept spending in August even as gas prices spiked, according to Commerce Department data released Wednesday, September 16. Retail and food services sales rose 1.2% month-over-month, blowing past the 0.8% gain economists polled by Reuters had forecast. That's a sharp reversal from July, when sales fell a revised 0.5%, the first monthly decline in nine months.

The rebound was broad. Nonstore retailers, meaning mostly online sellers, posted the biggest gain outside gasoline at 2.6%, according to TradingView. Miscellaneous retailers rose 1.9%, electronics and appliances climbed 1.6%, and both food services and sporting goods stores gained 1.2%. Furniture, clothing, and general merchandise stores each rose around 0.7% to 0.9%. Building materials was the only category to fall, down 0.2%.

Gasoline stations led every category with a 3.1% jump, according to Action Forex, but that reflects higher pump prices, not more gallons sold. Even stripping out gas, sales still rose 1.1%. AAA data cited by Ground News put gas prices at $4.37 a gallon in August, up sharply amid renewed fighting in the Middle East.

The number that matters most to economists is the so-called control group, sales excluding autos, gasoline, building materials, and food services, which feeds directly into GDP calculations. That measure jumped 1.4%, more than triple the 0.4% gain forecast, according to both Yahoo Finance and TradingView. Reuters reported that third-quarter growth estimates now exceed a 2.0% annualized rate on the back of that number.

Not every read on the data was as upbeat. The National Retail Federation offered what Crypto Briefing described as "a more measured read," noting that its own core retail measure, which strips out autos, gas stations, and restaurants using a different set of exclusions than the government's control group, rose just 0.1% for the month. That's a meaningfully weaker signal than the headline 1.2% or the 1.4% control group figure. These are genuinely different calculations producing different pictures of how broad the strength really is. None of the figures are adjusted for inflation, a point Reuters, Ground News, and Action Forex all noted explicitly.

The spending data lands against a backdrop of stubborn inflation. The Labor Department's August consumer price index, released the prior Friday, showed prices up 0.4% for the month and 3.4% over the year, according to Breitbart. Core CPI, which excludes food and energy, rose 0.3% monthly and 2.4% annually, a slight cooldown from July's 2.5%. Gasoline prices were up 27.4% year-over-year, accounting for more than a third of the monthly increase, which Reuters attributed to an oil price shock and supply chain strain tied to the U.S.-led war with Iran.

All of this is unfolding as the Federal Reserve is expected to announce, later Wednesday afternoon, its first interest rate hike since 2023. It would be the first hike under Chairman Kevin Warsh, who was nominated by President Trump, according to CNN. Investing Live reported that futures markets had already priced in a 92% probability of a hike before the retail data dropped, with two additional hikes priced in through year-end, and that the strong retail numbers didn't move those odds because the market's attention was fixed on the Fed decision itself.

Senator Elizabeth Warren, a Massachusetts Democrat and frequent critic of Warsh, told CNN that "Donald Trump's economic policies have backed Kevin Warsh into a corner," pointing to the Iran conflict and tariff policy as drivers of the inflation forcing the Fed's hand. She called the coming rate hikes an "economic disaster" for families carrying credit card debt or shopping for mortgages. That's Warren's characterization of the cause. The Fed itself has not issued a statement attributing its decision to any specific administration policy, and the retail and inflation data released this week show inflation running hot regardless of which policy gets the blame.

CNN's own report went further, writing that "ironically, Trump's own policies have helped create a situation where his handpicked Fed chair has no choice but to hike." That's CNN's framing of the situation, not a claim made by the Fed or by Warsh himself, and it should be read as such.

Stocks were mixed shortly after Wednesday's open, according to CNN: the S&P 500 up 0.3%, the Dow down about 0.1%, and the Nasdaq up 0.45%, with oil trading above $100 a barrel for the first time since July. The major indexes had fallen in six of the previous seven sessions heading into the Fed's decision, which is due later Wednesday afternoon alongside updated economic projections that will show whether officials expect further tightening into next year.