U.S. Retail Sales Data Shows Underlying Strength In Ad Market.

U.S. retail sales rose more than anticipated in August, driven by broad consumer spending and increased dining out. While there are growing concerns over a softening labor market and rising prices — partly due to tariffs — Brian Wieser of consultancy Madison and Wall says the latest numbers demonstrate resilience in the advertising marketplace.

The Commerce Department’s report on Tuesday marked the third consecutive month of strong sales growth, and economists believe it’s unlikely to deter the Federal Reserve from cutting interest rates on Wednesday. Still, the solid retail data may prompt the Fed to proceed more cautiously with any further rate reductions.

Wieser says the latest data shows “remarkable strength, which might be viewed as surprising in context of a weakening labor market and a growing range of economic and political concerns.” But he said the numbers highlight key support for what he expects will be a resilient advertising market in the third quarter.

“Retail sales represents a smaller share of the economy’s economic activity when compared with spending on services,” Wieser writes. “But it nonetheless incorporates important economic data for a wide range of advertising-dependent categories.”

Including gasoline, motor vehicles and food services, there was a 5% year-over-year gain on an adjusted basis — accounting for seasonality and other factors — or 3.5% on a non-adjusted basis. “Incorporating elevated rates of inflation, the growth rates aren’t quite as strong as they might appear,” Wieser writes, “but the acceleration from July’ s year-over-year growth rates (now revised upwards vs. last month’s initial release) are nonetheless noteworthy.”

The revised data shows a 5.9% increase in sales at motor vehicle dealers, a 3.2% rise at food and beverage stores, and a 1.9% gain at general merchandise stores. Food services and drinking places — an important indicator of discretionary spending — also saw strong growth, up 6.5%. Most notably for the advertising sector, nonstore retailers, primarily composed of e-commerce businesses, recorded a 10.1% increase in sales, accelerating from July’s 7.8% growth rate.

“The implied e-commerce acceleration is particularly noteworthy because of the heightened level of competitive intensity that exists within e-commerce marketplaces and which leads to heightened levels of spending by manufacturers,” Wieser explains. “E-commerce contributes further to elevated levels of spending on advertising because e-commerce-based retailers have an advertising intensity (i.e., allocations of advertising expense per dollar of gross sales) that is approximately four times higher than traditional retailers.”