Americans increased their spending at stores and restaurants in August, defying economists' expectations for a slowdown. The latest retail sales report from the U.S. Census Bureau shows spending was up 0.6% from July to August.
The growth comes amid concerns over tariffs, inflation, and a slowdown in hiring. The national unemployment rate recently rose to 4.3%. But despite some economic indicators moving in the wrong direction, consumers are still buying, albeit with caution.
Caleb Silver, the editor-in-chief of Investopedia, credits higher-income households in part for the boost in spending.
"We have concerns about the general direction of the economy right now but we're seeing a lot of the spending being driven by the top 10% of earners," Silver said.
Back-to-school shopping was a key driver in August, with spending up in categories like electronics, sporting goods, clothing and accessories.
"You saw it in footwear; you saw it in some back-to-school supplies. So that's really what drove the spending in August higher than what was expected," Silver said.
Experts also believe some consumers are spending now in anticipation of higher prices later this year due to tariffs.
"I think this is kind of pre-buying and that's where we're seeing the economy look good in that sense," said Kyle Peacock, founder of Peacock Tariff Consulting.
Peacock, whose firm focuses on tariffs for small and medium-sized businesses, says retail giants like Walmart and Home Depot raised prices early on, and other industries will soon follow.
"We're getting a lot of companies that are just placing the orders now that are seeing the ramifications of tariffs," he said.
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Major retailers like Walmart, Macy's and Best Buy report their customers are still buying but are much more selective about how they spend their money.
Restaurant spending, which is often a barometer for discretionary spending, also remained strong in August, rising 0.7% after a slip in July.
The strong consumer spending report comes as the Federal Reserve meets this week. The central bank is weighing the softening job market and rising prices. The Fed is expected to announce its decision on a potential interest rate cut on Wednesday.
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