Fading fiscal stimulus crimping US consumer spending

WASHINGTON: US consumer spending slowed in August, with a key retail sales gauge unexpectedly declining, as extended unemployment benefits were cut for millions of Americans, offering more evidence that the economic recovery from the COVID-19 recession was faltering.

Retail sales excluding automobiles, gasoline, building materials and food services dipped 0.1 per cent last month after a downwardly revised 0.9 per cent increase in July. These so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, were previously reported to have advanced 1.4 per cent in July.

Job growth slowed further in August and new applications for unemployment benefits remained perched at extraordinarily high levels in early September. At the same time, manufacturing is also showing signs of tiring, with output slowing last month. Consumer spending suffered a record collapse in the second quarter. The pullback in core retail sales in August, if sustained, would set up consumer spending on a slower growth path in the fourth quarter. Growth estimates for the third quarter top a 30 per cent annualised rate. The economy contracted at a historic 31.7 per cent pace in the April-June quarter.

Sales at electronics and appliance stores rose just 0.8 per cent after surging 20.7 per cent in July. Receipts at auto dealerships rebounding 0.2 per cent after falling 1.0 per cent in July.

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