I spent most of Tuesday morning perusing the U.S. Commerce Department’s August retail sales report. It’s not exactly light reading – I’d prefer a Clive Cussler novel any day. Still, this spending barometer reveals quite a bit about the state of the economy in general and carries broad implications for several of my holdings.

#-ad_banner-#While the data can be choppy from month to month, it’s pretty clear that the U.S. consumer is in a good mood right now. Various consumer confidence surveys are giving conflicting readings. Taken together, they suggest attitudes remain upbeat, but with a growing level of unease. However, that anxiety has had a negligible impact on the collective pocketbook.

Retail expenditures climbed 0.4% in August from the prior month. That might sound tepid. But in a $20 trillion economy, even fractions of a percent equate to billions of additional dollars going into cash registers. The growth rate was also double what economists were expecting (which has been the norm lately). Actual results have overshot economists’ projections in four of the past five months.

August’s robust growth comes on top of an upwardly-revised 0.8% increase in July, about three times what the market was anticipating. And remember, these are month-to-month comparisons. If we compare the year-over-year basis, the $526 billion spent in August 2019 was 4.1% higher than August 2018.

So while persistent tariff and trade worries continue to rattle Wall Street, they apparently aren’t raining down on Main Street.

Last month’s spending increase was driven by a surge in vehicle sales. We can’t read too much into that just yet, considering many dealerships run big promotions leading up to Labor Day to clear out older models. Still, there were bright spots in other areas as well – namely construction materials, sporting goods and bookstores.

There was strong foot traffic at many physical retail outlets. But e-commerce remains a driving force. Internet shopping has jumped another 16% from where it stood 12 months ago.

Of course, consumers tend to spend more freely when their paychecks are getting fatter. And not only has the economy been creating 175,000 new jobs per month on average over the past year, but hourly wages have been climbing at a 3% or better pace for 13 consecutive months – the best stretch in over a decade.

That means more disposable income to spend on everything from groceries to SUVs. Referring to consumers as the locomotives of the economy, JP Morgan’s chief U.S. economist acknowledged all this, suggesting there is “little reason to expect a near-term retrenchment in retail spending.”

That’s of great import to investors. After all, consumer spending accounts for roughly 70% of the country’s GDP. And a good chunk of that is spent at retail outlets; the rest goes to healthcare, housing and other needs.

Action To Take
Barring a late collapse, retail sales this year will likely eclipse last year’s record-high $6 trillion, fueling continued GDP expansion. Needless to say, that broad tailwind will benefit companies ranging from Amazon (Nasdaq: AMZN) to Procter & Gamble (NYSE: PG) to Ford Motor Company (NYSE: F) to name a few — as well as a host of smaller players.

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