U.S. consumers pared back spending in August, partly because they participated so vigorously in Amazon.com's (AMZN) - Get Amazon.com, Inc. Report Prime Day sale during the prior month, according to a new report from Bank of America.
Retail sales excluding autos fell by 0.5% last month, economists for the Charlotte-based lender wrote this week in a report. The estimate was based on statistics pulled from Bank of America's own massive database on credit-card and debit-card purchases.
"Amazon Prime Day and other retailers' summer promotions in mid-July provided a significant boost to spending," according to the report. "These promotions effectively pulled forward demand into July and out of August."
Bank of America's data release might offer an advance glimpse of a U.S. Census Bureau report to be released Friday detailing trends in retail sales during August. The government report is expected to show that U.S. retail sales excluding autos rose by 0.2% in August, slowing from July's Amazon-hypercharged 1% pace, based on a survey of economists by the data provider FactSet.
Per Census data through July, retail sales have risen every month this year except for February, and there hasn't been a cutback of 0.7% or more since late 2018, when the U.S. stock market swooned due to rising interest rates.
"Our data show that August was a difficult month for the retailers," according to Bank of America. "We expect to similarly see a weak retail sales report from the Census Bureau."
Declining consumer optimism also may have played a role in the spending cutback, the economists wrote. A slew of recent surveys have shown that President Donald Trump's intensifying trade war with China has sapped confidence among consumers, business executives and investors alike, largely due to fears that an escalation of the dispute could cause damage to a global economy that's already slowing.
"We suspect that the drop in sentiment left consumers a bit more hesitant to spend this month," wrote the economists, Michelle Meyer, Anna Zhou and Joseph Song.
Even more worrisome, some consumer spending during the month might have been related to the approach of Hurricane Dorian.
There was a "large increase in spending in Florida in the last few days of the month," adding some 0.2 to 0.3 percentage points to spending, as people "stocked up on essentials," according to Bank of America.
"In other words, if not for proactive hurricane-related spending, aggregate retail sales would have been down 0.7 to 0.8 percent in August," the economists wrote.
Economists monitor retail sales closely, since consumer expenditures account for about 70% of U.S. gross domestic product.
Ian Shepherdson, chief economist for the forecasting firm Pantheon, said that consumers might have started to cut back on purchases as the windfall fades from Trump's late-2017 tax cuts.
"Sales were very strong last summer as a result of the tax cuts, which put cash into peoples' pockets," Shepherdson wrote this week in a report. "But this cashflow gain was a one-time event, with no further incremental tax cuts this year."
And the month's spending data could come with a twist: It's possible that the specter of Trump's trade war with China, including the threat of more import tariffs in the future, might have prompted some consumers to accelerate purchases -- before expected price increases take effect, according to the economist.
"It makes perfect sense for people planning purchases of goods subject to the tariffs, including clothing and footwear, to bring forward those purchases in order to avoid the tariff hit," Shepherdson wrote.