Retail sales in August beat expectations, up 0.4% thanks primarily to strong auto sales, which jumped 1.8%. But excluding autos, retail sales were nearly flat.
“The details weren’t quite as good as the headline number,” PNC Financial Chief Economist Gus Faucher told Yahoo Finance’s “The First Trade.” Sales at restaurants and on clothing, furniture and at department stores were down about 1%, a sign consumers were being a little more cautious last month.
Consumers are one of the biggest drivers of U.S. economic growth, but despite some weakness in the report, Faucher said consumers were out spending and don’t seem to be worried about a slowdown.
Consumers “are the best indicator now of what’s going on in the economy,” Faucher said. “I think consumers remain in pretty good shape. The savings rate is high, debt burdens are low, and I think that as long as consumers continue to spend – and I think the fundamentals there are pretty good – the expansion should continue.”
“The consumer fundamentals remain pretty solid and we’ll see consumers continue to spend through the rest of 2019,” he said.
The retail sales report is the last major piece of economic data ahead of next week’s Federal Reserve Open Market Committee meeting, and PNC is predicting a 25-basis-point cut.
“The U.S. economy is expanding in the middle of 2019, but the risks are weighted to the downside,” Faucher said. Among the risks: President Trump’s ongoing trade war with China, a global economic slowdown and the worries over a no-deal Brexit.
“I think it makes sense for the FOMC to cut now, they can always raise rates later if the economy picks back up again,” Faucher said. “Monetary policy works with a lag. This way the economy is protected if we do see more slowing in growth.”