Consumers continued to show their resilience in August as retail sales came in above expectations in the second month of Q3 2025. The headline sales total increased by 0.6% MoM, ahead of the consensus forecast of just 0.2% MoM. Adding to the strength in the report was an upward revision in July's monthly growth from 0.5% MoM to 0.6% MoM. Overall, the summer months have brought about a strong trend in the retail sector with monthly growth averaging around 0.75% from June to August. Sales in those three months are up 1.0% over the March-May period and up 4.5% YoY.

The August retail sales number was heavily affected by the large auto segment as well. Retail sales of motor vehicles & parts were up 0.5% MoM, slightly behind the headline pace as the auto market cooled down from volatility seen earlier this year, caused by tariffs. Affordability is also a concern and has put a bit of a dampener on auto spending over the summer. The segment’s sales over the last three months were down by -0.4% MoM compared to the March-May period. However, on an annual basis, auto sales are up 5.6% YoY.

Outside of the auto segment, sales growth was even stronger than the headline rate, up 0.7% MoM, ahead of expectations of a 0.4% MoM increase. Here’s how the segments break down:

• The non-store segment of sales, the second largest segment, played a major role in driving sales growth in August. It saw a sharp 2.0% MoM increase, the largest one-month increase since September 2024. Removing this segment and the auto segment, sales growth was just 0.3% MoM in August and averaged 0.5% MoM in the summer months.
• Food & drinking place sales growth was 0.7% MoM in August and has been pretty strong over the summer. However, the solid growth in August looks tamer after a slight -0.1% MoM drop in July. Regardless, spending on this segment is up a healthy 6.5% YoY.
• Sales growth in various non-discretionary segments was a bit tamer. The food & beverage (+0.3% MoM), general merchandise (-0.1% MoM), and gas station (+0.5% MoM) segments all saw increases in August below the headline rate. When adjusted for inflation, these smaller gains suggest flat volume growth.
• Real estate-related segments looked to be some of the weakest segments in August. Furniture sales dropped -0.3% MoM during the month, though this did come after a 1.6% MoM increase in July. This segment may also have been affected by tariff-related volatility since furniture purchases tend to be infrequent and on the larger side. Building materials sales were up just 0.1% MoM in August and fell -0.9% during the summer months. Both tariffs and housing sector weakness are likely to continue to weigh on sales here in the near future.