WASHINGTON — Retail sales rose at specialty stores in August, while falling at department stores as the overall sales dipped, the Commerce Department’s monthly report showed Thursday.

Sales at apparel and accessories stores rose a seasonally adjusted 0.7 percent to $21.3 billion, while sales at department stores dropped 0.6 percent to $13 billion. Sales at general merchandise stores, a category that includes department stores and discounters, were essentially flat at $55.9 billion.

Non-store sales, which are primarily online sales, posted a 0.3 percent decline in sales last month.

In the overall economy, retail sales fell 0.3 percent to $456.3 billion. Economists generally had forecast flat sales or a smaller decline.

“The pattern of summer slowing was evident last year and that is what we’re seeing again this year,” said Jack Kleinhenz, chief economist at the National Retail Federation. “Despite this drop off, other indicators suggest that this is a temporary dip and that consumers will remain a driving force in the U.S. economy.”

Kleinhenz said the August retail sales data “may also reflect a drag from ongoing retail price declines that have affected the industry for several years. Rising incomes and steady employment gains should provide the fuel for spending as we look ahead to the holiday season.”

Ryan Sweet, direct of real-time economics at Moody’s Anlaytics, said the consumer turned “a little frugal” in August.

“It shouldn’t be too surprising or worrisome,” Sweet said. “Spending has been very strong in the second quarter and consumers just took August off.”

He said the apparel specialty store, department store and general merchandise store sectors-all posting year-over-year sales declines in August-are weak because of competition from online sales.

“They are getting hurt by online. Non-store retail sales have been very, very strong over the past year,” Sweet said. “They dipped in August for the month but that is the first decline since early 2015. Declines in on –store retail sales are few and far between recently.”
Sweet said the back-to-school shopping season will not be a “banner year but not a disaster either.”

Moody’s  is forecasting a 3.8 percent annualized increase in the second half of the year, which it revised slightly downward  due to the August retail sales report.

Craig Johnson, president at Custom Growth Partners, said the back-to-school results are “coming in close to our forecast.”
For the two-month July to August period, his firm is forecasting a 3.5 percent increase in sales year over year.

But the three-month back-to-school forecast through September –of a 3.3 percent year-over-year increase– is a “clear deceleration from the 4 percent plus growth of each of the last two years—4.1 percent and 4.2 percent,” Johnson said.

“Apparel remains underwater,” Johnson said, with back-to-school sales down 1 percent in July and August on a year-over-year basis, while department stores are “particularly struggling,” down 5.7 percent year-over-year.

The one bright spot continues to be direct- to- consumer and online sales, which were up 12 percent year over year, Johnson said.
“The sluggish August numbers are not a surprise, either from what our 18-member field team was reporting back each week, or regarding our dour 3.3 percent forecast–which represented a deceleration from last year’s 4.1 percent year-over-year growth,” Johnson said.

“The reasons behind the lackluster growth remain the same:  each month sees more and more household income directed to non-discretionary spending, for health care, insurance, housing, student debt and public transportation; these items now account for 4 percent more of consumer spending than they did a decade or so ago,” he added.
 

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