Retail Sales Miss Expectations; Jobless Claims Tick Up

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Gene J. Puskar/AP
By Lucia Mutikani

WASHINGTON -- U.S. retail sales rose less than expected in May and first-time applications for unemployment benefits increased last week, but did little to change views that the economy is regaining steam.

Thursday's reports came on the heels of recent data showing solid job growth in May and strong expansion in manufacturing and services industries.

The Commerce Department said retail sales gained 0.3 percent last month. While that was below economists' expectations for a 0.6 percent rise, April's retail sales were revised to show a 0.5 percent increase.

Retail sales, which account for a third of consumer spending, had previously been reported to have edged up 0.1 percent in April.

%VIRTUAL-article-sponsoredlinks%"The continued gains during the first two months of the second quarter suggests that consumers are continuing to hold their side of the bargain, building on the strong momentum at the end of the last quarter," said Millan Mulraine, deputy chief economist at TD Securities in New York.

In a separate report, the Labor Department said initial claims for state unemployment benefits climbed 4,000 to a seasonally adjusted 317,000 for the week ended June 7.

U.S. stocks opened lower. U.S. Treasury debt prices rose, while the dollar slipped against a basket of currencies.

The economy added 217,000 jobs in May, the fourth straight month of job gains above 200,000, and has recouped all the 8.7 million jobs lost during the recession. The unemployment rate held steady at a 5½ year low of 6.3 percent.

Economic growth in the second quarter is expected to top a 3 percent annual pace after the economy contracted at a 1 percent rate in the January-March period.

The lofty growth forecasts were supported by a second report from the Commerce Department showing business inventories recorded their biggest increase in six months in April.

Upward Revisons

So-called core retail sales, which strip out automobiles, gasoline, building materials and food services, and correspond most closely with the consumer spending component of gross domestic product, were unchanged last month.

However, they were revised to show a 0.2 percent rise in April, instead of the previously reported 0.1 percent dip. Economists said retail sales were up at a 9.2 percent annualized pace over the last three months.

"This points to ongoing solid momentum in personal spending in the second quarter, which we currently peg at a rate around 3.25 percent," said Anthony Karydakis, chief economic strategist at Miller, Tabak in New York.

In May, consumers bought automobiles, boosting receipts at auto dealerships 1.4 percent. Excluding autos, retail sales rose 0.1 percent in May.

There were solid gains in sales at building materials and garden equipment stores, as well as receipts at non-store retailers, which include online sales. Sales at furniture stores also rose.

However, there were marginal declines in sales at sporting goods shops, electronics and appliances stores, as well as at clothing retailers and restaurants and bars.

Another report from the Labor Department showed little signs of imported inflation, with import prices edging up 0.1 percent last month. In the 12 months through May, prices increased 0.4 percent, advancing for the first time since July.

9 PHOTOS
9 Numbers That'll Tell You How the Economy's Really Doing
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Retail Sales Miss Expectations; Jobless Claims Tick Up
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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