Just when it appeared as though the nation's economy was about ready to pick up another dose of momentum, albeit a modest one, the Commerce Department threw a bit of cold water on that expectation a few minutes ago by reporting that retail sales had risen by just 0.2% in August, which was half the forecast increase of 0.4% for the latest month.

However, figures for July were revised upward from an initially estimated 0.2% to a gain of 0.4%. In May and June, the increases were 0.5% and 0.7%, respectively. On a year-to-year basis, the 12-month advance in spending from August to August came to a solid 4.7%.

Meanwhile, if we back out auto sales, which are large-ticket items and can distort the aggregate picture, the rise was just a scant 0.1%, with motor vehicle sales, themselves, rising by about a full percentage point. That gain comes after back-to-back monthly declines in this category. Other areas showing month-to-month improvement in August were sales of furniture and home furnishings, which rose 0.9%, and electronics and appliances, which did almost as well gaining 0.8%. Health and personal care items also tracked higher, adding on 0.6% last month. Finally, sales via the Internet picked up, tacking on 0.5%.

On the other hand, the consumer held back on purchases of clothing and accessories (down 0.8%), sporting goods (off 0.5%), and building and garden equipment (which declined by 0.9%). 

Overall, as noted, the so-called core rate of spending, which backs out the volatile auto component, and which, as noted, rose by just 0.1% in August, gained only a third as much as had been expected. Core retail sales, by comparison, had been up by 0.6% in July, but had risen by a more modest 0.2% in both May and June.

Retail sales are a particularly closely watched report, as the consumer accounts for some two-thirds of aggregate economic activity. Although this was a somewhat disconcerting report, it is unlikely, in our estimation, to affect the thinking of the Federal Reserve, which will be holding its FOMC meeting next Tuesday and Wednesday. That is if it was disposed to begin tapering its bond-buying program as soon as next week, it likely will go ahead with it. As to economic growth, in general, in the third quarter, we still expect GDP to post an increase of some 2.0%-2.5%, with July's upward revision largely countering the less-upbeat August metric. 

At the time of this article's writing, the author did not have positions in any of the companies mentioned.