WASHINGTON -- Auto buying drove U.S. retail sales higher in August, a possible sign that job growth in recent months has led to accelerated consumer spending.
The Commerce Department said Friday that seasonally adjusted retail sales rose 0.6 percent compared with the prior month. Sales are up 5 percent in the past 12 months. July sales were also revised upward from flat to a 0.3 percent increase.
"Consumers came back with a vengeance in August," said Chris Christopher, an economist at IHS Global Insight. "Retail sales were driven by a strong need to buy automobiles, falling [gasoline] prices, rising consumer confidence and stronger than expected back-to-school sales."
Motor vehicles accounted for roughly half of the August increase. Buying also picked up at restaurants and for furniture, electronics, sporting goods and building materials.
Those gains were partially offset by falling sales at gasoline stations and department stores.
Lindsey Piegza, chief economist at Sterne Agee, said falling gas prices put extra money in people's pockets, which increased their spending. But sustained retail sales growth will come when incomes rise, she said.
"Continued price reprieve at the pump will help maintain a modest but positive spending pace in the third quarter, despite minimal improvement in wage growth," she said in a Friday note. But "in order to see a marked increase in spending ... consumers will need sustained, robust income gains."
The figures suggest that Americans' reluctance to spend has faded somewhat, even though their wages have yet to increase by much. The increase in retail sales could help overall economic growth because consumer spending accounts for 70 percent of the economic activity.
Paul Dales, senior U.S. economist at Capital Economics, said the sales increase points to stronger economic growth through the end of the year and start of 2015.
"With further jobs gains, rises in income growth and a loosening in credit conditions in the pipeline, consumption growth should strengthen in the fourth quarter and into next year too," Dales said.
But there are mixed signals from other indicators regarding consumers.
The University of Michigan said its index of consumer sentiment rose to 82.5 in August from 81.8 in July. But much of that increase was attributed to greater optimism about jobs, rising incomes and increasing wealth among higher-income groups.
The pace of hiring slipped in August after several months of strong gains.
Employers added just 142,000 jobs last month, well below the 212,000 average of the previous 12 months. The unemployment rate fell to 6.1 percent, from 6.2 percent. But that was because more people without jobs stopped looking for them and were no longer counted as unemployed.
The largest drop in hiring last month occurred in retail, which shed 8,400 jobs after gaining 21,000 in July.
Wage gains have been sluggish since the recession ended in 2009, and that's led many people to be more cautious about spending money. Average hourly pay rose 6 cents to $24.53 in August. That's only 2.1 percent higher than a year ago and barely ahead of the overall 2 percent inflation rate.
Yet consumers felt comfortable enough with their financial situations to ramp up auto buying last month. There were 1.58 million motor vehicles sold last month, giving the auto industry its best August in 11 years, according to a separate measure by Ward's Automotive. That represented a 5.4 percent increase in auto buying over the past 12 months.
Chrysler sales soared 20 percent, while Nissan jumped nearly 12 percent. Total sales last month ran at an annual rate of 17.5 million, the highest since January of 2006.
"We're going to close out the year with the highest production plan we've had in seven years," Bill Fay, Toyota's U.S. sales chief, said on a conference call this month. "Consumer confidence is up, spending growth is out there in the marketplace, interest rates are stable, fuel prices are stable. It's pretty darn close to ideal."
Information for this article was contributed by Josh Boak of The Associated Press, by Shan Li of the Los Angeles Times and by Shobhanna Chandra of Bloomberg News.
Business on 09/13/2014