US retail sales up 0.2% in July
WASHINGTON, USA
US retail sales edged up in July despite a drop in auto sales. A category of purchases that excludes the most volatile areas rose by the most in seven months, a sign that consumer spending could boost economic growth in the coming months.
The Commerce Department yesterday said that retail sales increased 0.2 per cent in July from June. Sales had risen 0.6 per cent in June from May on a surge in auto sales.
“Core” retail sales, which exclude the volatile auto, gas and building supply categories, rose 0.5 per cent in July. It was the biggest such gain since a similar increase in December.
Retail sales are closely watched because they’re the government’s first report each month on consumer spending, which accounts for 70 per cent of US economic activity.
Yesterday’s report is “consistent with a decent acceleration” in consumer spending in the current July-September quarter, said Paul Dales, senior US economist at Capital Economics.
Dales suggested that consumer spending, which rose at an annual rate of 1.8 per cent in the April-June quarter, could grow at a 2.5 per cent annual rate or better in the current July-September quarter.
“Households may be spending a bit more freely in response to the recent gains in employment, equity prices, house prices and the modest loosening in credit,” Dales said.
Sales at department stores rose 0.6 percent in July, rebounding from a 1.2 per cent drop in June. A broader category of general merchandise, which covers big retailers such as Wal-Mart and Target, rose 0.4 per cent after no change in June.
Purchases at gasoline stations rose 0.9 per cent, an increase that partly reflected higher pump prices. Excluding gasoline, retail sales would have risen 0.1 per cent in July.
Sales at clothing stores rose 0.9 per cent, and they increased 0.6 per cent at grocery stores and restaurants. At furniture stores, sales fell 1.4 per cent. Purchases at building supply and appliance stores also weakened.
The US economy grew at lacklustre annual rates of 1.1 per cent in the January-March quarter and 1.7 per cent in the April-June quarter. But many economists think growth will rebound in the second half of the year to an annual rate of roughly 2.5 per cent.
Optimism stems, in part, from the notion that consumer spending will strengthen for the remainder of the year as the effects of this year’s tax increases and spending cuts start to fade. Economists also think consistently improving home sales and higher stock prices will make people feel more comfortable spending money in stores.
Steady job growth will help, too. In July, the unemployment rate fell to a 4 1/2-year low of 7.4 per cent, from 7.6 per cent in June, though employers added only a modest 162,000 jobs.