Nonstore retail sales surged 2.0 percent in August. Should the Fed be cutting rates?
Please consider the Census Department Advance Estimates of U.S. Retail and Food Services for August 2025.
Advance estimates of U.S. retail and food services sales for August 2025, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $732.0 billion, up 0.6 percent (±0.4 percent) from the previous month, and up 5.0 percent (±0.5 percent) from August 2024.
Total sales for the June 2025 through August 2025 period were up 4.5 percent (±0.4 percent) from the same period a year ago.
The June 2025 to July 2025 percent change was revised from up 0.5 percent (±0.4 percent) to up 0.6 percent (±0.2 percent).
Nonstore retailers were up 10.1 percent (±1.2 percent) from last year, while food service and drinking places were up 6.5 percent (±1.8 percent) from August 2024.
Upward Revisions
Last month I commented “The strongest part of the report was the upward revision to June. Otherwise, the report matched the Bloomberg Econoday Consensus.”
This month we see another upward revision, albeit smaller, from 0.5 percent to 0.6 percent.
Nonstore sales are simmering.
Inflation Adjustments
The key phrase from the commerce departments is “adjusted for seasonal variation and holiday and trading-day differences, but not for price changes.”
It’s “real” inflation-adjusted sales that matter to GDP. Few analysts report on real sales, but I do.
Real Advance Retail Sales Month-Over-Month
Real Month-Over-Month Details
- Total: 0.2 percent
- Excluding Motor Vehicles: 0.3 percent
- Excluding Motor Vehicles and Gas: 0.3 percent
- Motor Vehicles: 0.1 percent
- Food Stores: -0.1 percent
- Nonstore (think Amazon): 1.6 percent
It’s important to look at real numbers because that is what drives GDP.
Inflation added 0.4 percent to all of the numbers.
Real vs Nominal Retail Sales Since 1992
Real vs Nominal Retail Sales Detail
Real vs Nominal Retail Sales Percent Change From Year Ago
Percent Change From Year Ago Details
- Nominal Retail Sales: 5.0 Percent
- Real Retail Sales: 2.0 Percent
The adjusted charts put a badly-needed perspective on things. They show the alleged strong consumer is really a mirage of inflation.
Should the Fed Be Cutting Rates?
The only reason to cut rates is a weak labor market. Price inflation (and more is coming from tariffs) say hell no.
But the question is moot. The Fed has made up its mind to cut rates, so it will. It will be interesting to see what debate there is over these details at tomorrow’s FOMC meeting.
Related Posts
September 12, 2025: Consumer Sentiment Sours in September, Inflation Expectations Rise
Sentiment downturn strong in lower- and middle-income levels.
September 11, 2025: Food Prices Spike Again in August. What’s in Your Basket?
The CPI was up more than expected in August. Food played a role.
September 11, 2025: CPI Provides No Reason for Fed to Cut Interest Rates, It Will Anyway
The CPI was higher than expected in August, but the Fed will do what it wants to do.
Tomorrow, the Fed will cut interest rates. The discussion should be interesting.
Repeat from last post because it is important …
“Why is everyone here on Mishtalk so damn upset with Trump taking steps to decouple from China?”
Doug78 and BenW have what’s known as “stupid-colored-glasses”
Both have TWS – Trump Worship Syndrome
Neither can distinguish between the desire and need to decouple from China from the idiotic way Trump is going about things.
Credit to Trump for changing the basic response to China. But lately? My impression is, China has its vulnerabilities, but seems to be holding on, and enlarging its own opportunity set (pipelines, military advances, new trade axes, new international payment system). Meanwhile, what has Trump got for us that is concrete or reliable? He’s flip-flopped on chips, on TikTok, meanwhile sacrificing coherence in US policy affecting our own automakers. He seems to have fired threats first, before awakening to our rare minerals vulnerabilities, and is suddenly sounding a lot nicer toward them. But luckily for us, he has time to castigate “sissy football.” Meanwhile, where are all those great tennis shoe assembling jobs?
China just completed a hydroelectric dam the height of the Eiffel Tower. They are turning off their solar, coal and other alternative energy because this single hydroelectric dam can provide power for the next 100 years including for all of the demand of AI.
Unlike the US, china does not have the issues of corporatism to deal with. The best choice is made for the long term prosperity of the county.
Our economy in the west’s so broken we dont even realize it.
If the Fed cut rates, the US dollar collapses, which would then lead to the rates surging and hyperinflation. It’s checkmate.
They were front-running the end of the de miminis exemption….which was to expire
Aug. 29.
My take on decoupling from China is rather basic:
We used to import deflation via subsidized goods. This was excellent for our economy, corporate profit margins and it cost China money via the subsidies. Additionally, they took fabricated dollars in payment and re-invested them in low interest bonds which financed our purchases. We also had a booming economy that generated large tax revenues.
The system was not broken or even threatened. The dollar was king ~ Yet many (especially trumps turnips) complained it was.
Now our situation is infinitely worse. We are decoupling from China without stockpiling the vital rare earths they provided or, finding/developing alternatives. Trump has driven China, Russia, India, Brazil and Asia together while simultaneously alienating our allies: Canada, Mexico and the EU nations
Trump has far worse than losing a chess game stupidity… We are talking world class stupid that even a dull checkers player should have seen in his last term when he should have been stockpiling rare earths and developing other resources.
Rather than importing deflation we are crushing our manufacturers with tariffs that raise their raw materials costs and crushing losses of unskilled laborers.
It would have been far less expensive to make contact with illegals and provide legal access to becoming taxpayers than deporting huge numbers of vital workers, taxpayers and future homeowners.
Our greatest asset was our banking system and trump is trying to break it and the dollar…
Who does trump work for?
Mortgage delinquencies are way up.
That happens when you deport a million + workers that are just starting to build their families and assets. Corporations can now buy the homes and jack up the real estate values and rentals rates.
No more debt slaves ~ just slaves…
Make America Grovel Again?
Who does trump work for?
>>>
You ignore the invasion of millions of illegal aliens which preceded the deportations. Action and reaction.
The leftist WEF’s plan is the people owning nothing and being happy. Democrats covet the land of single family owners in Pacific Palisades, to put in multi unit low income rental housing.
Lending by the commercial banks is inflationary (expands both the volume and turnover of new money). Lending by the non-banks is non-inflationary (matches savers with borrowers and investments).
Interest is the price of loan funds. The price of money is the reciprocal of the price level.
N-gDp level targeting suggest now is the time to cut rates.
Policy rates should be cut. The 1966 Interest Rate Adjustment Act is the paradigm. I.e., Reg. Q ceilings should be reimposed.
But you can’t cut rates much lower than a bank’s NIM or the banks will expand credit.
The name of the game is stagflation whereby employment shrinks and prices continue up. Ever since Liberation Day.
Interesting. So, Mish, I guess this means the AI revolution replacing human labor means more Robocops, Robodogs, and Robotrucks along with robotic planes, trains and taxis that won’t be paying into social security while the products and services provided will be Robotaxed with additional taxes and tariffs or a VAT instead to make up the difference in productivity for a rising consuming middle class living the American dream in a ticky tacky Roborental with a required cranial chip for monitoring ideological health on the Robomedium of binary machine code run by trillionaires. . .
A bit off-topic, but, an interesting quote of RFK Jr., as it seems to cut across various viewpoints expressed here (and I’m not affirming or denying its claims, here):
” … President Trump did more than all the preceding presidents, back to George Washington, to saddle our children with a $33 trillion debt. The small business closures under President Trump shifted $4 trillion of wealth north into the pockets of a new oligarchy of billionaires, creating approximately 500 new billionaires in five hundred days. The closure of all those small concerns proved the final nail in the coffin for the American middle class. …”
RFK Jr., in his foreword to this 2024 book:
Trump’s War on Capitalism by David A. Stockman
as viewed in google books (click preview):
https://www.google.com/books/edition/Trump_s_War_on_Capitalism/SLXLEAAAQBAJ
Atlanta Fed GDPNow ticked up ~10% to a 3.4% level. Another clear data point among all the others (including the historically low 4.3% unemployment rate), that the Fed needs to aggressively cut.
PS Get back to me when unemployment surpasses 5%. Employers are “hugging” employees just as much as employees are hugging employers, BTW. Earnings percentages at companies remain near historic highs.
Earnings are 2.3% higher as a percentage of national income when compared to pre-pandemic. That is an absolutely massive jump.
“The Fed has made up its mind to cut rates, so it will. It will be interesting to see what debate there is over these details at tomorrow’s FOMC meeting.”
I think they now have the best case of the year to hold rates steady.
Frank Showstack has a very interesting take on inflation and prices that includes a paragraph on how the definition of inflation has been wrongly coopted to be rising prices. It causes a person to ponder what fed motives really are.
Inflation And Embezzlement
I personally believe the fed should not cut rates for many reason. For this discussion, inflation is very likely, and it is likely to be severe. If we enter that scenario, then putting the inflation genie back in the bottle will be much more painful than a little more wait and see at this juncture.
Bottom line is we are in a massive bind with too much debt and a government that has outgrown the private sector’s ability to finance it. The fed cannot fix that mess with lower rates or QE since an excessive debt problem obviously cannot be repaired with more debt. Lower rates and QE encourage more debt. Government must solve the problem.
Mish – Can you still use a blanked CPI to adjust those sales? First, it seems like individual categories are less correlated than ever and second, a place like Amazon is going to have a lot of sellers who have jacked prices because of tariffs which are only just now, maybe, getting captured by ppi/cpi.
This is what the BEA does, perhaps using PCE instead.
By custom on monthly reports of consumer spending, the CPI is the deflator.
Little difference.
It is what the BEA uses so it’s the only way to do it.
They could make believe the numbers and then always only report the revised numbers and just say that we have the numbers but we’re going to wait to release them until they’re revised!
0% likelihood of what you say.
Too many people involved in data collection and someone would know and squawk
I’d be interested in whether this changes your recession take? The question about whether they should cut rates implies either
you don’t think we are in or headed for a recession
or
you do but you prioritize inflation over employment.
All the big bank credit card issuers report declines in their delinquency rates. Seems robust consumers. Not recessionsry
What the fed wants or doesn’t want is irrelevant with this turnip for a president. He and his ilk want to continue to buy up America with free money, and they will get what they want. 5000 lords and ladies owning 98% of everything is next.
What about the 15 minute city by 2030 where you will own nothing?
Heh?
I pay around $19,000 a year for property taxes. For what I own. All cities used to be 15-minute cities. It was great.
Still on the same nonsense. Rates will be FOUR%. Not ZERO, 400bps higher! What happened from 2009-2016, did you call Obama a turnip when rates were ZERO without his saying a thing? You must wake up with the same loop in your head. The nation has been running deficits and stacking up debt for decades and rates were ZERO for years and years. NOT FOUR, ZERO! No turnip required.
Still gonna bring “the turnip” to your daily harangue?
The Fed is feckless, weak, the opposite of data-dependent. They will cut and then lie as to the justification. As David Stockman said, if you looked at these inflation numbers on a textbook test or using a past lens, you’d never say “gosh, we need looser policy”.
The dictator – your words – will have had nothing to do with it. His desire is irrelevant as he’d want ZIRP.
This fed is literally ignoring their primary mandate in lieu of not letting official unemployment figures go up for even a second. The opposite of how they treated the “transitory” inflation. Asymmetric and criminal.
I look only at the debt number and ask “who is buying those bonds” and what yield would be appropriate knowing it cannot be repaid but in deflated dollars…and at what rate will they be deflated 30 years hence. Root vegetables or not.
According to the chart, interest rates were zero or near zero from 2008 to 2020, due to wreckage from Great Recession and subprime meltdown. Everyone who had credit loved it, including Obamas and his people. Even I flipped some credit card balances to zero rates. But eventually we need the adults to come back and make 4% the norm. Trump is doing what turnips do.
And yes, he’s following the Hitler enemies list playbook line by line. Started with trans kids, illegals, federal employees and lefties. Then moved to law firms and colleges. When he finally gets to federal retirees, I’m toast.
… and being shy about going outside, for fear of getting their heads popped.
More suspect econ/data to be revised downward next reporting date.
I just dont believe anything the says anymore.
It’s called conflict of interest. The baby boomers have a real problem with the concept.
Most people still have good Jobs and tons of disposable income..
Thats not good news. The mass layoffs have just begun. If this is all thid economy can do based on 4.5% unemployment then it tells you the economy is a lot worse than the UE would indicate.