Growing demand fires up US retail sales
SALES at US retailers rose in July on growing demand for everything from cars to clothing. A decline the previous month was wiped away, signalling that consumers are propelling growth in the world’s largest economy.
The 0.6 percent advance matched the median forecast of economists surveyed by Bloomberg. It followed little change in June – previously reported as a 0.3 percent drop – a Commerce Department report showed yesterday. Eleven of 13 major categories showed gains.
Rising employment, stronger finances and still-cheap fuel is helping draw consumers into stores and car dealerships. Growth in household spending, which accounts for about 70 percent of the economy, is bolstering the expansion, as Federal Reserve policymakers move towards lifting interest rates this year for the first time since 2006.
“The consumer is in good shape,” said Brian Jones, a senior US economist at Société Générale in New York, before the report. “We have a vibrant labour market and the unemployment rate continues to move lower. The outlook for third-quarter spending is pretty decent.”
A report from the Labor Department showed applications for unemployment benefits last week hovering close to a fourdecade low, a sign firings remain muted as the job market firms.
While jobless claims climbed by 5 000 to 274 000 in the period ended August 8, they remain close to the 255 000 reached a month ago – which was the lowest since 1973.
Fuel price slump
The cost of goods imported to the US fell 0.9 percent in July from the prior month, the biggest drop since January, another Labor Department report showed. The decrease was led by a slump in fuel prices.
The Commerce Department’s report showed retail sales excluding vehicles increased 0.4 percent in July for a second month. The revised reading for June also reversed a previously estimated 0.1 percent drop, painting a healthier picture for consumer spending.
The updated June figures, combined with upward revisions to May, will probably prompt economists to boost tracking estimates of second-quarter growth. The Commerce Department last month reported gross domestic product grew at a 2.3 percent annualised rate from April to June.
Before the retail sales report, economists at Morgan Stanley and Barclays had already put the second-quarter reading closer to 3 percent based on previously updated figures for construction spending and inventories.
The job market is giving consumers the money to keep spending. Payrolls grew in July by 215 000 workers following a 231 000 gain in June, and the jobless rate held at a seven-year low of 5.3 percent. – Bloomberg