US retail Sales unexpectedly rose last month

In August, US retail sales showed resilience with a 0.1% increase, following an upwardly revised 1.1% surge in July. This unexpected rise suggests that the economy remained solid heading into the third quarter, despite expectations for a 0.2% decline.
Core retail sales, which exclude autos, gasoline, building materials, and food services, also increased by 0.3%, signaling strong consumer spending, a key driver of GDP growth.

Consumer spending accelerated in the second quarter, and the momentum appears to have continued into the third, with growth forecasts for Q3 at around 2.5% annually, after a 3.0% growth pace in Q2.
Despite the rising jobless rate in previous months, it fell slightly to 4.2% in August, keeping layoffs low and wage gains steady.
This labor market strength has been a foundation for ongoing consumer spending.

However, concerns loom over the declining personal saving rate, which dropped to 2.9% in July, approaching levels not seen since 2008.
Some economists caution that this could signal weaker future spending if labor market conditions worsen. Others, though, argue that household balance sheets remain strong, supported by rising home and stock prices, and that certain income sources, like those from undocumented workers, might not be fully captured in official data.

As the Federal Reserve meets to discuss policy, most economists expect a modest 25 basis point rate cut.
With the Fed’s benchmark rate currently in the 5.25%-5.50% range, the decision will balance signs of steady economic growth with potential risks, as inflationary pressures remain in focus for policymakers.