Retail Sales Rose 0.5 Percent in July
Business + Economy

Retail Sales Rose 0.5 Percent in July

WASHINGTON (AP) — Consumers spent more on autos, furniture, clothing and gas in July, pushing up retail sales by the largest amount in four months. The gain signaled that Americans are a little more confident in the economy and could helped dispel fears that the country is headed for another recession.

Retail sales rose 0.5 percent last month, the Commerce Department said Friday. It was the best showing since March. The government also revised sales higher in the previous two months.

Even after excluding sales at gas stations, which were influenced by an increase in gas prices, sales rose 0.3 percent last month.

The better-than-expected data on retail sales is the second strong signal on the economy in as many days. Dow Jones futures gained 83 points after the release. On Thursday, the Dow Jones industrial average closed up 423 points for the day after the government said the number of people applying for unemployment benefits dropped below 400,000 for the first time since early April.

"Don't write off the American consumer or economy just yet," said Sal Guatieri, senior economist at BMO Capital Markets. "The solid July retail sales report should help allay recession fears."

The report is the government's first read on consumer spending for the July-September quarter. Consumer spending is always closely watched because it accounts for 70 percent of economic growth. But in June, consumers cut spending for the first time in 20 months, a troubling sign.

Retail sales, which don't include spending on services, have been slowing since February. July offered some hope that the consumer was

For July, auto sales rose 0.4 percent after a 0.7 percent gain in June. Demand for cars has been low this year, and many dealers have also had a hard time stocking popular models because of supply chain disruptions stemming from the Japan crisis.

Gasoline sales rose 1.6 percent. The increase was largely because of the rise in gas prices.

Purchases of furniture rose 0.5 percent, electronics store sales increased 1.4 percent, and sales at specialty clothing stores climbed 0.5 percent.

Sales at department stores fell 0.8 percent in July. Economists had expected them to show a rise following reports from big retailers that they had a decent start to the back-to-school shopping season.

Sales at a broader category of general merchandise stores, which includes department stores and big retailers such as Wal-Mart, were flat in July following a 0.5 percent rise in June.

Many retailers had reported last week that back-to-school promotions had helped boost their sales in July. Target, Macy's and luxury chain Saks all reported gains that beat Wall Street expectations. But retailers are worried that consumers may be thrifty when shopping this summer, sticking with basic necessities and holding out for sales. That's a popular strategy in tighter economies, but one that hurts stores' profits.

High unemployment and a spike in gas prices have forced many consumers to be more cautious about spending. Their hesitation was a major reason the economy grew a meager 0.8 percent in the first six months of the year, the weakest growth since the recession officially ended.

A batch of poor data and a gloomy outlook from the Federal Reserve this week have made investors more nervous that the economy could fall back into a recession. The Dow has lost nearly 1,600 points, or more than 12 percent, since July 22.

Many economists, including Federal Reserve Chairman Ben Bernanke, had thought the economic slowdown was mostly because of temporary factors, such as high gas prices and the parts shortage out of Japan.

But this week the Fed acknowledged that the economy's problems are deeper. Its statement suggested growth could be dismal for at least two more years.

As a result, the Fed took the unprecedented step of pledging to keep a key interest rate it controls at a record low near zero at least through mid-2013.

Private economists have been busy marking down their own forecasts. Analysts at JPMorgan Chase said they expect the just 1.5 percent growth in the July-September quarter, a full percentage point lower than their previous forecast.

Copyright 2011 The Associated Press.