WASHINGTON -- Retail sales showed a broad-based gain in June, pointing to a gain in consumer spending that probably helped the U.S. economy rebound in the second quarter, analysts said.
Purchases increased 0.2 percent after a 0.5 percent advance in May that was larger than previously reported, the Commerce Department said Tuesday. The reading fell short of the 0.6 percent increase projected by the median estimate of 83 economists surveyed by Bloomberg, restrained by a drop among auto dealers. Demand climbed in nine of 13 major categories last month.
Consumers are more comfortable opening their wallets as a strengthening labor market lifts earnings. Higher wages give American households the ability to withstand increases in food and gasoline costs.
The figures show "a strong consumer feeding into second-quarter GDP growth," said Michael Hanson, U.S. senior economist for Bank of America in New York. "You are seeing some steady gains in employment, less so in wages, but that does help."
Estimates for retail sales in the Bloomberg survey ranged from gains of 0.2 percent to 1.1 percent. May's reading was revised from an initially reported 0.3 percent increase.
Clothing stores, general merchandise merchants and nonstore retailers, which include online vendors, were among the major retail categories showing gains last month, Tuesday's report showed.
Further healing in the labor market is giving households the wherewithal to spend. Employers added 288,000 jobs in June, lifting the average monthly advance so far in 2014 to almost 231,000. If that pace is sustained, job gains this year would be the best since 1999. The national unemployment rate dropped last month to an almost six-year low of 6.1 percent.
The sales data for last month were held back by an unexpected 0.3 percent drop for auto and parts dealers. The figures, which aren't used in calculating GDP, were at odds with industry data.
Cars and light trucks sold at a 16.9 million annual pace in June, the strongest since July 2006, according to Ward's Automotive Group. Deliveries at General Motors and Ford, the two largest U.S. automakers, exceeded analysts' estimates. The government uses these industry figures in calculating growth.
Excluding cars, sales climbed 0.4 percent in June for a second month.
"The labor market is achieving somewhat better footing" and "housing data in May were showing some signs of revival," Ellen Hughes-Cromwick, chief economist at Dearborn, Mich.-based Ford, said on a July 1 sales call. "We've seen very good improvements in manufacturing activity. Consumer sentiment has been in good stead, and incomes are gaining ground."
Core sales, the figures used to calculate gross domestic product and that exclude such categories as autos, gasoline stations and building materials, increased 0.6 percent last month, the best showing since March, after a revised 0.2 percent increase in May that was bigger than previously reported. The previous month had initially been recorded as unchanged.
U.S. same-store sales rose 5.9 percent in June from a year earlier, according to the International Council of Shopping Centers.
U.S. companies restocked their store shelves and warehouses at a steady pace in May, a sign they expect sales will remain solid in the months ahead.
Business stockpiles rose 0.5 percent in May, the Commerce Department said Tuesday in a separate report. That was down slightly from a 0.6 percent gain the previous month. April's increase was the highest in six months. Total business sales rose 0.4 percent, much lower than April's 0.8 percent gain.
Steady inventory rebuilding can bolster economic growth by increasing demand for manufactured goods and increasing factory production. Still, sales need to remain healthy so companies aren't stuck with unwanted inventories.
For May, inventories at the wholesale level climbed 0.5 percent, while inventories held by retailers ticked up just 0.2 percent. Stockpiles held by manufacturers rose 0.8 percent.
Businesses sharply cut back on restocking in the first three months of the year, a big reason the economy shrank at a 2.9 percent annual rate. That was the largest contraction since the first quarter of 2009, in the depths of the recession.
But since then companies have stepped up their inventory rebuilding. Greater restocking suggests that companies are confident consumer and business spending will grow, and they want to ensure that they have enough goods to meet the demand.
Information for this article was contributed by Michelle Jamrisko and Chris Middleton of Bloomberg News and Christopher S. Rugaber of The Associated Press.
Business on 07/16/2014