US retail sales ran out of gas in August, but real spending solid

The Census Bureau's Advance Report on Retail and Food Services Sales in August will provide a final look at consumer spending activity ahead of next week's Federal Open Market Committee (FOMC) meeting. Constrained by a price-led decline in gasoline purchases, retail sales probably rose by 0.3% last month, half the gain recorded in July.

The headline result likely will mask a pickup in spending categories that feed into government statisticians' GDP estimates, however. Indeed, outlays on so-called retail control purchases are expected to have risen by 0.5% - the largest increase in three months. With temperature-related hikes in utilities bills expected to provide a lift to services spending during the reference period, nominal personal consumption expenditures (PCE) likely expanded by 0.4% in August, double the uptick posted in July.

With retail goods and services costs expected to remain stable last month, real PCE likely increased by 0.4% as well, placing inflation-adjusted spending over the July-August period 2.5% annualized above the April-June average, after the spring quarter's 3.1% advance.

"Our projection would be consistent with another solid expansion in real GDP during summer - our current call is for a 3.5% increase - and, though a close call, a liftoff in administered rates at the upcoming FOMC gathering", says Societe Generale.