WASHINGTON: US retail sales rose in July for the first time in four months as demand climbed broadly for everything from cars to electronics, a sign consumers could drive faster economic growth in the third quarter.
Retail sales rose 0.8 percent last month, the largest gain since February and well above analysts' expectations, data from the Commerce Department showed yesterday.
A separate report showed US producer prices climbing in July at the fastest pace in five months even as energy prices fell.
The retail sales data bolsters the view that the slowdown in economic growth during the second quarter will prove temporary.
"Here comes the US consumer," said Harm Bandholz, an economist at UniCredit in New York.
"Retail sales did not only rise again in July, they jumped."
The report could give some relief for President Barack Obama, whose November re-election bid has been imperiled by a sour jobs market. Republican challenger Mitt Romney is focusing his campaign on the weak economy that has plagued Obama's presidency.
The retail sales and price data could also splash a bit of water on hopes the Federal Reserve could soon launch another bond-buying program to help the economy.
"The numbers ... reduce the possibility of Fed action at the next meeting," said Vassili Serebriakov, a currency strategist at Wells Fargo in New York.
Fed policymakers meet next on Sept. 12-13.
Economists polled by Reuters had expected retail sales to rise 0.3 percent. US stocks opened higher on the data along with yields on US government debt. The dollar rose against the yen.
Job creation in the United States slowed dramatically in the second quarter as economic growth cooled to a 1.5 percent annual rate. In June, sales at US businesses slipped the most since March 2009, the Commerce Department said in a separate report.
Still, some economists think data showing stronger exports will lead the government to revise upward its estimate of growth during the second quarter.
Hiring picked up last month although the unemployment rate still rose to 8.3 percent.
Pointing to a strong increase in consumer spending in July, the so-called core measure of retail sales — which excludes autos, gasoline and building materials — rose 0.9 percent. That was the biggest gain since January.
Strength in consumer spending could help corporations doing business in the United States. Home Depot Inc. raised its earnings outlook on Tuesday as the world's largest home improvement chain beat Wall Street's profit estimates in the latest quarter.
In July, sales of motor vehicles and parts rose 0.8 percent. Receipts at electronics and appliance stores increased 0.9 percent. Sales of building materials gained 1.0 percent, while receipts as gasoline stations advanced 0.5 percent.
Still, dark clouds continue to loom over the economic outlook.
The euro zone's debt-ravaged economy shrank in the second quarter after flatlining in the first, a report showed yesterday.
US small business sentiment fell for a third straight month in July as owners worried about sales revenue, according to a survey by the National Federation of Independent Business. The NFIB index eased to 91.2 last month from 91.4 in June.
Europe's debt crisis appears to be slowing growth around the world, including in China, and has pushed oil prices lower in recent months.
The producer prices report reflected the drop in oil prices.
While prices rose for light trucks, pharmaceutical drugs and cigarettes, the gain in the overall index was muted by a drop in energy prices.
The Labor Department said its seasonally adjusted Producer Price Index climbed 0.3 percent last month. Analysts polled by Reuters expected the index to increase 0.2 percent.
The increase was driven by gains in consumer goods, with light trucks up 1.6 percent and pharmaceuticals up 0.9 percent.
Higher food costs also fueled the gain in the overall index. US crops have been struck by a drought in parts of the country.
Energy prices, however, fell 0.4 percent last month. They were down for a fifth straight month in a trend that has been cooling inflation pressures. Wholesale gasoline prices fell 3.1 percent in July.
While overall inflation has cooled recently, core inflation has held at higher levels. Some policymakers at the Fed worry that further moves to lower borrowing costs could fuel higher inflation, though the central bank has said it was ready to do more to help the economy if needed.
"This report suggests core inflation will persist despite price swings in food and energy," said Cooper Howes, an economist at Barclays in New York.
The fall in energy prices is likely to help the economy as lower costs for fuels and other input prices leave companies more money to spend on other things, such as equipment or even hiring.
