May take more to rain on this consumers parade

Summary

Consumer resilience remains intact. Households continued to spend into August, and upward revisions to recent data suggest overall spending is on track to rise twice the pace of our previous estimate in Q3. We still see downside risk around coming consumption, but the household sector is on more solid footing than previously indicated.

Source: U.S Department of Commerce and Wells Fargo Economics

Economic uncertainty meet sturdy consumer

The household sector continues to demonstrate resilience through uncertainty. Overall consumer spending rose 0.4% in August on an inflation-adjusted basis. While strength in spending wasn't concentrated in any one consumer segment, growth in discretionary purchases stands out to us (chart). Recreational goods (which includes anything from board games to recreational vehicles) jumped 3.3% in August, made more impressive following a 2% gain the month prior. Clothing sales were also another bright spot, up 1.1% last month, marking the fourth straight monthly gain and ninth in eleven months in real inflation-adjusted terms. On the services side, the largest gains came from recreational services and transportation services.

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