US retail spending stays strong in August, but auto and aviation sectors show weakness
US consumer spending exceeded forecasts in August, posting its fastest growth in nearly two years, while industrial production fell for the first time this year amid sharp declines in the auto and aviation sectors. The Fed, meanwhile, resumed raising interest rates.
US retail sales showed strong growth in August, with turnover excluding autos and gasoline rising 1.2% month-on-month — beating economists' forecasts and marking the fastest increase in nearly two years. About half of the growth came from higher online spending, but the increase was broad-based, covering almost all retail categories except building materials. Year-on-year, retail growth accelerated to 5.6%, suggesting US consumer activity remained fairly resilient to external shocks in the third quarter as well.
Industrial weakness emerges
Industrial output, however, fell 0.3% in August — the first decline since the start of the year. The steepest drops came in the auto and aviation industries. Year-on-year industrial growth slowed to 0.9%. Mining output edged up slightly, by 0.1% month-on-month and 0.3% year-on-year. US oil production reached 13.9 million barrels per day by the end of August, even as the number of active oil rigs declined slightly since mid-August.
Fed raises rates again
At its September meeting, the US Federal Reserve raised its interest rate by 0.25 percentage points to a range of 3.75-4% — the first rate change since it cut rates last December. The Fed's latest projections point to one more hike by year-end, bringing the rate to 4-4.25%, a level it expects could hold throughout next year. At the same time, US economic growth forecasts for 2026 and 2027 were revised upward, unemployment projections were lowered, and the inflation forecast for 2026 was raised slightly. Futures markets are pricing in at least one more 0.25-point hike by year-end and two further increases by mid-next year, which would put the rate at 4.5-4.75%.
