Retail sales surged toward the end of summer. The U.S. economy has plenty of momentum.

By Jeffry Bartash

Internet sales and restaurant spending are leading the way

Shoppers were out and about in August.

Sales at U.S. retailers surged in August and posted the biggest increase in five months, offering another piece of evidence suggesting the economy sped up toward the end of summer.

Sales at retailers shot up 1.2% last month, the government said Wednesday. That was well above the Wall Street forecast.

Car dealers sold more vehicles and higher energy prices boosted receipts at gas stations, but sales were just as strong even excluding those two segments. Internet retailers and restaurants were the biggest winners.

The trend in retail sales in the past year is quite robust, even with high inflation. Receipts have risen 6%, well above the long-term average, although sales were more modest after taking inflation into account.

Retail sales represent a large slice of consumer spending - the main engine of growth for the U.S. economy.

The economy is on track to expand at a speedy 4.4% pace in the third quarter, which runs from July through September, according to the Atlanta Federal Reserve's GDPNow forecasting tool.

The economy's average of rate of growth in the past 25 years is a smaller 2.3%.

Key details: Internet sales rose a sharp 2.6% in August as expected, rebounding from a slump following Amazon Prime Day in the prior month.

Sales also increased a surprisingly strong 1.2% at bars and restaurants, the only major service category in the retail report. People dine out and buy more takeout when the economy is stable and growing.

The monthly figures are adjusted for seasonal swings in sales.

Big picture: Americans are spending enough money to grease the wheels of the economy, especially wealthier people who have benefited from ever-rising stock prices. For lower-income families, it's more of a struggle.

Yet part of the increase in spending merely reflects higher inflation - Americans are paying more for gas and other goods and services. The strain on families from higher inflation could persist for some time.

Looking ahead: "Even if higher prices are making consumers unhappy, they're not doing much to hurt the economy yet," said David Russell, global head of market strategy at TradeStation.

Market reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX were set to open higher in Wednesday trading.

-Jeffry Bartash

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

09-16-26 0922ET