Rise in household spending boosts US retailers

The report on retail sales added to the fairly upbeat July employment and business confidence reports that suggest the U.S. economy was expanding steadily at the beginning of the third quarter.

The Census Bureau said that retail sales increased 0.6 percent in July, bouncing back from being unchanged in June.

The increase in retail sales was partly due to a notable rebound in auto sales, which surged up by 1.4 percent in July after tumbling by 1.5 percent in June. The revised reading for June also reversed a previously estimated 0.1 percent drop, painting a healthier picture for consumer spending. This increase led several economists to project that the economy grew at an annual pace of roughly 3 percent during the second quarter, as opposed to the 2.3 percent estimate announced last month by the government.

However, June data on factory inventories and imports as well as upward revisions to May construction spending figures have left economists expecting that the advance second-quarter GDP growth figure could be raised to at least a 3.0 percent pace.

“Market sentiment remained brittle amid still elevated concerns about China’s slowing economy and depreciating currency, which should keep the dollar and its top peers on a volatile footing”. “We have a vibrant labor market and the unemployment rate continues to move lower”.

Excluding automobiles, gasoline, building materials and food services, retail sales rose 0.3 per cent after a revised 0.2 per cent gain in June.

Purchases at non-store retailers, which include online merchants, were among the best performers last month.

Receipts at sporting goods and hobby stores rose 0.9 percent. Clothing and accessories edged up 0.4%.

Consumers have also benefited from cheaper gasoline. “After all, something is needed to support consumer spending going forward, particularly business investment and development”.