Strong August retail sales released on Thursday erased fears of stagflation on Wall Street, as American consumers shook off Delta variant concerns.

U.S. Census Bureau reported that sales in the country’s restaurants and retail stores rose by 0.7% monthly, surpassing market expectations of a 0.8% drop.

Retail sales increased by 1.8%, which is well above the 0.1% market expectations. This confirms a remarkable turnaround since July’s 1.8% drop in retail sales, which eases concerns that the U.S. might be heading towards tepid growth. It’s an example of higher inflation and lower economic growth.

The largest sales increases were recorded in non-store retailers (5.3%), followed closely by furniture (3.3%), general merchandise stores (3.5%), food and beverage stores (1.8%), and building materials (0.9%).

The gains in overall sales were offset by the losses at other businesses like sporting goods and motor vehicle parts. These sectors are most vulnerable to supply chain problems.

The generous unemployment benefits, as well as the pent-up savings that were made during the pandemic helped August’s retail sales. This allowed for more money to be put into American families’ hands.

However, September is the end of pandemic unemployment benefits. This means that the pandemic savings are depleted and retail sales may not continue growing at the same rate in the future.

This is why investors and traders are less enthusiastic about buying stocks. Major averages moved south on Thursday after trading began. However, the declines continued to accelerate in late-morning traders. At 11.30 a.m., the Dow Jones was down 0.6%, the 0.7%, and the tech-heavy Nasdaq 0.65%.

An economic report on labor showed that 332k Americans had filed new unemployment claim in the week ended September 11th, up from the 312,000 who were affected by the pandemic.

Wall Street was less enthusiastic about August’s vital retail sales and this led to a decrease in selling pressure. The U.S. Treasury bonds also experienced a moderate increase in trading during morning trade, as this helped to ease the market pressure. The 10-year Treasury benchmark bond trades at 11:30 AM with a yield yield of 1.33%. This is up 2.07% from Wednesday’s closings. (Higher bond yields are associated with lower bond prices).

However, Wall Street activity and Thursday’s economic announcements should not be overlooked by investors. After yesterday’s solid trading session, the declines in equity indexes could be profit taking.

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