US Retail Sales Fell in August, But Outlook Remains Bright

Businessman checking the retail information on his iPadHurricane Harvey’s impact on automotive purchases in August affected retail sales in the US. It dropped 0.2% for the month — excluding cars, gas, construction materials and food services. This is according to the Commerce Department.

A 1.6% decline in motor vehicle sales, along with an adjusted sales increase in July to 0.3% from 0.6%, suggested consumers’ modest spending in the third quarter of 2017. However, a KMPG report showed that retail CEOs remain confident about business prospects in the next three years.

Sales Tumble

Even if hurricane Harvey affected car sales in August, the auto industry might see an opportunity to recover. It would be through an expected increase in demand for replacing flood-damaged cars. The Commerce Department also said that total retail sales nationwide rose 3.2% in August year over year. This suggested an underlying strength in demand from local consumers.

Consumer spending climbed 3.3% in the second quarter at an annualized rate. This increase supported GDP growth to 3% in the same quarter. Spending power among consumers is important since it represents more than two-thirds of the U.S. economy. Despite the decline in sales for August, retail CEOs expect business to be good over the next three years.

Bright Outlook

The changing industry landscape requires companies to invest in digital infrastructure. This is aside from manager-in-training programs for retail businesses. According to KPMG’s US CEO Outlook report, 95% of surveyed CEOs believe that investing in physical and digital capabilities will be crucial. It will help businesses remain competitive.

This is favorable for the business environment in the coming years especially in the case of companies unable to keep up with competitors — startups in particular. For two-thirds of respondents, this will likely disrupt their businesses, apart from technological innovation.

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Despite the impact of Hurricane Harvey to retail businesses, recovery may be easier. And it is all because of a generally favorable outlook on the industry in the next few years.