New York // Retail sales in the US climbed last month by the most in four months, showing people are still buying even as employment slows.
The 0.5 per cent increase reported by the commerce department in Washington yesterday matched the median forecast of 81 economists surveyed by Bloomberg News and followed a 0.3 per cent increase in June that was larger than previously estimated. Excluding car sales, purchases rose more than projected.
More Americans drove away from car dealerships in new models last month as an easing of supply-chain constraints caused by Japan's March earthquake and tsunami provided consumers with more variety and better pricing. Even so, Federal Reserve policymakers this week said they were concerned household spending had "flattened out" and the recent plunge in stocks was hurting confidence.
The gain in spending is "pretty relieving," said Michael Feroli, the chief US economist at JPMorgan Chase in New York. "The upward revisions suggest that the trajectory of consumer spending heading into the third quarter wasn't as bad as previously thought," he said.
Stock-index futures extended earlier gains after the report. The contract on the Standard & Poor's 500 Index rose 0.8 per cent to 1,178 in early New York trading. Treasury securities also climbed, sending the yield on the benchmark 10-year note down to 2.29 per cent from 2.34 per cent late Thursday.
Economists' estimates ranged from increases of 0.1 per cent to 1.5 per cent. Non-car sales were projected to rise 0.3 per cent, according to the survey median.
Nine of 13 major categories showed a gain in sales last month, led by electronics stores, furniture retailers, car dealers and service stations.
Excluding cars and service stations, sales climbed 0.3 per cent after a 0.5 per cent gain in June that was larger than previously estimated.
Excluding cars, petrol and building materials, which are the figures used to calculate GDP, sales rose 0.3 per cent after a 0.4 per cent gain the prior month.
Car sales showed a 0.4 per cent increase. Cars and light trucks sold at a seasonally adjusted pace of 12.2 million last month, up from 11.4 million in June yet trailing the 12.5 million average pace through the first half, according to Autodata. Deliveries at the Detroit-based GM climbed 7.6 percent from the same month in 2010 to 214,915.
"Although the economy has clearly lost some momentum, we do believe that it will continue to recover, but more gradually than we had originally anticipated as we move through the second half of the year," Don Johnson, the vice president of General Motors US sales, said earlier this month. Moderating petrol prices have "provided some needed relief to consumers," he said.
Retailers, including Macy's and Limited Brands, reported sales last month that exceeded analysts' estimates. Purchases at Macy's rose 5 per cent, surpassing the 4.4 per cent average projection compiled by Retail Metrics. Limited, the operator of the Victoria's Secret chain, posted a gain of 6 per cent from a year earlier.
The economy expanded at a 1.3 per cent annual rate in the second quarter of this year, less than forecast, from a 0.4 per cent pace in the first three months of the year, commerce department figures showed last month. Household spending rose at 0.1 per cent pace in the second quarter, the weakest since the same period in 2009.
Fed policymakers said on Tuesday that economic growth this year had been "considerably slower" than expected. Furthermore, "temporary factors," including Japan's disaster and high fuel costs, likely accounted for "only some of the recent weakness in economic activity," they said.
They announced this week that they would hold their benchmark lending rate near zero at least until mid-2013 to spur the economy.
The labour market is struggling. The economy added 117,000 jobs in July, bringing the average gain in payrolls over the past three months to 111,000. That was about half the 204,000 increase on average in the first four months of the year.
* with Bloomberg News