Surprise uptick in spending by Americans as delta spread

NEW YORK — (AP) — Americans continued to spend at a brisk pace last month in the face of rising COVID-19 infections, though much of it was done online and not at restaurants or other sectors in the U.S. economy beleaguered by the arrival of the delta variant.

Retail sales rose a seasonally adjusted 0.7% in August from the month before, the U.S. Commerce Department said Thursday. That uptick caught most economists by surprise. Consensus estimates were for a decrease of 0.85%, according to a survey of economists by FactSet.

Online sales soared 5.3% last month, while sales at restaurants and bars, many of which believed they were through the worst of the pandemic until the arrival of delta, were flat from the month before.

Earlier this year as millions were vaccinated, restaurants, bars and other venues that rely on crowds began to bustle for the first time since early 2020. Then, in July, U.S. health officials recommended that even vaccinated people should wear masks when indoor in public due to the unchecked spread of delta, particularly in regions of the country with lower vaccinations rates.

Vaccine hesitancy in the U.S. is being cited by economists after the Labor Department reported this month that employers added just 235,000 jobs in August, far short of the million or so jobs added in each of the previous two months.

Back-to-school shopping may have given retail sales a boost. Sales at department stores rose 2.4% last month, according to the Commerce Department, as children headed back to the classroom and perhaps for the first time in more than a year, bought new clothing and other supplies.

The retail report released Thursday covers only about a third of overall consumer spending and doesn't include services such as haircuts, hotel stays and plane tickets. There is clear evidence that spending has waned in some of those industries. Airlines, for example, recently reported a drop-off in ticket sales and they blame the spread of the delta variant.

Auto sales continued to fall last month, likely because fewer cars were made due to a pandemic-related shortage of chips, which are needed to power screens and other tech features in cars. Sales at auto dealerships sunk 3.9% last month, the Commerce Department said.

Some economists still hope for a larger bump in consumer activity this year. The four-week average of jobless claims, which smooths out fluctuations in the weekly data, dropped for the fifth straight week, the Labor Department said Thursday. That's the lowest since the pandemic began.

More people are finding jobs and many of those who have remained in their jobs have saved cash during the pandemic and will have more to spend, said Sal Guatieri, a senior economist at BMO Capital Markets.

“The surprising upturn in August retail sales supports this positive message," Guatieri wrote.

However, much depends on whether the U.S. can contain the spread of the virus.

The Labor Department also reported Thursday that the number of Americans seeking unemployment benefits ticked higher from a pandemic low last week, a sign that the spread of the delta variant may have slightly increased layoffs.

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This story has been corrected to say online sales rose 5.3%, not 5.5%.

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Follow Joseph Pisani on Twitter: @ josephpisani

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