U.S. Retail Sales Drop Unexpectedly in August

Consumers cut back on spending in August, causing retail sales to fall 0.3 percent in the month, according to data released by the Commerce Department Friday.

The decrease in sales caught economists off guard; a survey of economists by MarketWatch and Bloomberg predicted retail sales would increase 0.4 percent in August.

A recent drop in gasoline prices -- combined with declining consumer demand for fuel -- was principally to blame, as sales at gas stations dropped 2.5 percent. Ironically, auto sales provided a boost to retail sales, increasing 1.9 percent in the month.

Excluding gasoline and auto purchases, sales fell 0.4% in August, the largest drop since December.

The Commerce Department’s report is seasonally adjusted and does not compensate for drops in consumer or producer prices.

Retail sales in June and July were also revised lower by an aggregate of 0.6 percentage points. The revisions showed that consumer spending was significantly weaker this summer than earlier believed despite the dispersal of about $100 billion from the government in the economic stimulus plan.

So far in 2008, retail sales are up 1.6 percent. Retail sales account for about half of total consumer spending, and about a third of final sales in the economy, according to MarketWatch.