Retail sales rise a better-than-expected 1.2% in August after shoppers pulled back spending in July

(SRN NEWS) – American consumers delivered a stronger-than-expected performance in August, increasing retail spending even as higher prices and sharply rising gasoline costs put renewed pressure on household budgets.

Retail sales climbed 1.2% last month, reversing a revised 0.5% decline in July, according to Commerce Department data released Wednesday. Economists had expected a gain of just 0.7%.

The report suggests that consumers remain a major source of strength for the U.S. economy, despite growing concerns about inflation and the financial strain facing lower- and middle-income households.

Excluding gasoline stations, retail sales rose 1.1% in August. Online retailers posted one of the strongest gains, with sales increasing 2.6%. Clothing and accessories stores reported a 0.7% increase, while furniture and home-furnishings stores saw sales rise 0.9%.

Restaurants, the report’s only services category, also registered a 1.2% gain. The figures do not include spending on travel, hotels, and other services, meaning the report captures only part of total consumer activity.

The August rebound followed a notable pullback in July. That decline had surprised economists because consumers had shown few previous signs of weakness. Americans spent heavily during major sporting events, seasonal promotions, and Amazon’s Prime Day sales. Retail traffic was also strong in April and May, when many households received government tax refunds.

But the latest numbers also highlight the growing challenge posed by energy prices.

The average price for a gallon of regular gasoline rose overnight to $4.37, according to AAA. That is approximately 47% higher than before fighting in the Middle East resumed, when gasoline cost less than $3 per gallon.

Diesel prices have increased even more sharply, rising 68%. Because diesel fuels shipping, trucking, agriculture, and manufacturing, higher diesel costs can spread throughout the economy by increasing the expense of transporting and producing goods.

The Labor Department reported that consumer prices rose 3.4% over the previous year. Prices also increased 0.4% from July, up from a 0.1% monthly gain the month before.

That combination—strong spending and persistent inflation—presents a complicated picture. Consumers are still buying, but retailers say shoppers have become more selective, looking for promotions and prioritizing essential purchases.

Some businesses are using government tariff refunds to reduce prices. Macy’s received $116 million in tariff refunds, according to Chief Executive Tony Spring, and said part of that money is being used to lower prices on selected big-ticket items, including furniture and fine jewelry.

Executives at the National Retail Federation said retail sales have performed better than expected so far this year. Mark Mathews, the group’s chief economist, said the spending gap between higher- and lower-income Americans also appears to be narrowing.

Higher-income households have generally benefited from rising incomes and wealth, while lower-income families have faced weaker income growth and steeper prices. Mathews said consumers remain willing—and, so far, able—to spend, but warned that outlook could become more difficult if energy costs remain elevated.

The key question for the months ahead is whether households can continue supporting economic growth while paying more for gasoline, transportation, food, and other necessities.

PHOTO- Shoppers browse the produce section at a Target store, Thursday, Aug. 13, 2026, in Woodbury, Minn. (AP Photo/Ellen Schmidt)