The American consumer returned in May.
Retail sales increased 1.2 percent last month after a 0.2 percent advance in April, Commerce Department figures showed Thursday in Washington. The gain was widespread, with 11 of 13 major categories gaining.
Over the past 12 months, sales have risen a solid 2.7 percent.
"The consumer took a month off and came back and spent in style," said Ward McCarthy, chief financial economist at Jefferies LLC in New York, who correctly forecast the increase in retail sales. "Consumers' behavior has been inconsistent, but the trend has been for gradual acceleration of spending."
The upswing in shopping reflects greater confidence in an economy still recovering from a recession that officially ended six years ago. Employers have added more than 3 million jobs over the past year. Yet until last month, many workers appeared to be saving as much of their paychecks as they could.
"The whole package is looking heartier," said Jennifer Lee, a senior economist at BMO Capital Markets. "Robust job growth, near decade-high auto sales, revolving credit rising at its second-fastest pace in eight years, and now, solid retail sales."
Excluding the volatile categories of autos, gasoline, building materials and restaurants, so-called core retail sales -- which factor into the government's official measure of economic growth -- rose 0.7 percent in May.
Some economists saw the increase as evidence of stronger economic growth during the current April-June quarter than earlier assumed. Paul Ashworth, chief U.S. economist at Capital Economics, responded to the report by suggesting that second-quarter growth could approach a healthy 3 percent annual rate.
Spending at auto dealers and building materials stores jumped 2 percent in May, evidence that consumers are making longer-term investments in their homes and cars.
The figures confirm the strength seen in separate reports on autos and housing. People bought cars and trucks last month at an annual pace of 17.8 million -- the fastest monthly rate since 2005, according to industry analyst Autodata Corp.
And the number of year-to-date, new-home purchases has surged nearly 24 percent, according to the government.
More Americans also are upgrading their clothing. Thursday's report showed that shopping at clothiers rose 1.5 percent last month.
Sales at gasoline stations increased 3.7 percent, largely reflecting the higher costs of gasoline since April. Prices at the pump rose by roughly 14 cents a gallon to $2.74 during Memorial Day weekend, according to AAA's Daily Fuel Gauge Report.
Spending growth at restaurants was subdued last month, inching up just 0.1 percent. But over the past year, restaurant and bar receipts have surged 8.2 percent.
Economists watch the retail sales report closely because it provides a limited but early indication each month of the willingness of Americans to spend. Overall consumer spending accounts for 70 percent of economic activity. Retail sales are about one-third of spending, with services such as haircuts and Internet access making up the remaining two-thirds.
Some economists interpreted the solid retail sales as showing that economic growth is improving enough for the Federal Reserve to raise historically low interest rates as early as September. The Fed has kept rates near zero since late 2008 to promote spending and borrowing by businesses and consumers clobbered by the recession.
Gregory Daco, head of U.S. macroeconomics at Oxford Economics, predicted that growth would average an annualized 3 percent in the second half of the year, enough for the Fed to start the process of lifting rates.
Job gains over the past year have helped drive down the unemployment rate to 5.5 percent from 6.3 percent in May 2014. Still, many Americans were hesitant to spend, probably because their incomes were barely rising above inflation. Average hourly earnings grew just 2.3 percent over the past 12 months, a pace that has recently accelerated but remains below the 3 percent level typical in a healthy job market.
Broader consumer spending, which includes services, was unchanged in April, the Commerce Department reported separately. On the whole, Americans chose to set aside a larger share of their paychecks. The savings rate reached 5.6 percent of after-tax incomes, the second highest level since December 2012.
Other reports Thursday showed claims for unemployment benefits remained below 300,000 for the 14th straight week, and the cost of imported goods rose in May for the first time in almost a year as fuel prices rebounded.
The Labor Department said weekly applications for unemployment aid increased 2,000 last week to a seasonally adjusted 279,000. The four-week average, a less volatile measure, rose 3,750 to 278,750.
Even with the increases, both figures remain at very low levels. The average fell to a 15-year low last month. Applications are a proxy for layoffs, so the figures suggest that few Americans are losing their jobs.
"The pace of layoffs is now close to all-time lows as a share of payrolls," said Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note to clients.
In addition to holding onto workers, businesses are also stepping up hiring. Employers added 280,000 jobs last month, the government said last week, a strong showing that suggests businesses are staffing up in anticipation of robust consumer demand.
That was more than last year's monthly average of 263,667, which was the most in 15 years.
U.S. businesses increased their stockpiles in April by the largest amount in nearly a year while their sales posted a second straight healthy advance.
Inventories held by businesses rose 0.4 percent in April compared to March when stockpiles had risen a much smaller 0.1 percent, the Commerce Department reported Thursday. It was the largest increase since a 0.5 percent rise in May 2014.
Total business sales rose 0.6 percent in April after a similar 0.6 percent rise in March. The March performance had been the first sales increase after seven consecutive monthly declines.
The expectation is that further sales increases will strengthen business confidence and lead companies to boost their stockpiling. The rise in stockpiles will support production gains at factories and overall economic growth.
Information for this article was contributed by Josh Boak, Christopher S. Rugaber and Martin Crutsinger of The Associated Press and by Victoria Stilwell of Bloomberg News.
Business on 06/12/2015