What: US retail sales rebound more than expected in August, up 1.2% with core sales surging 1.4%, even as import prices posted their sharpest annual rise since 2022. 

Why it is important: The strength of both sales and core spending signals US consumer demand can absorb a Fed rate hike, even as rising import costs point to further inflation pressure ahead.

Retail sales jumped 1.2% in August, the largest monthly gain since March, after a revised 0.5% drop in July. Economists had forecast only a 0.8% rebound, and sales were up 6.0% year-over-year. Core retail sales, which exclude autos, gasoline, building materials and food services, surged 1.4% - the biggest increase since September 2024 - well above the 0.4% forecast and closely aligned with GDP's consumer spending component.

Gains were broad-based: nonstore retailers rose 2.6%, electronics and appliances jumped 1.6%, sporting goods and hobby retailers gained 1.2%, and clothing stores rose 0.7%, with back-to-school demand a key driver. Food services and drinking places, a closely watched gauge of household finances, increased 1.2%. Building materials and garden equipment was the lone decliner, down 0.2%.

Import prices rose 0.7% in August and 7.0% year-over-year, the sharpest annual increase since 2022, driven partly by AI-linked demand for imported capital goods. Together with recent producer and consumer price data, the reports cemented expectations for a Federal Reserve rate hike the same day.

IADS Notes: The August rebound extends a pattern of US consumer resilience tracked over the past year. Sales growth has been consistently stronger than forecast even as households absorbed rising costs, as seen when June sales rose 0.2% excluding gasoline, lifted by nonstore retail and Prime Day promotions, and when May sales surged 0.9% despite Iran-conflict-driven gas price pressure. Further back, September 2025 spending held up even amid inflation and job-security anxiety, with upper-income shoppers and stock-market gains cited as key supports, a dynamic echoed in August's data, where wage growth and equity gains again underpinned demand. The import-price surge in this report also continues a cost-pressure narrative flagged as early as September 2025, when tariffs and price hikes were already pushing shoppers toward resale channels as an affordability response.

US retail sales rebound more than expected in August, import prices surge