Consumers Push Retail Sales Higher; Sentiment Perks Up

Retail Sales
Richard Drew/AP

By Lucia Mutikani

WASHINGTON -- U.S. retail sales rose broadly in August and consumer sentiment hit a 14-month high in September, which should ease concerns about consumer spending and support expectations for sturdy growth in the third quarter.

The Commerce Department said Friday retail sales increased 0.6 percent last month as Americans bought automobiles and a range of other goods after an upwardly revised 0.3 percent gain in July.

"It is further indication that the underlying positive momentum in the U.S. economy is being sustained," said Millan Mulraine, deputy chief economist at TD Securities in New York.

Separately, the Thomson Reuters/University of Michigan's consumer sentiment index rose to 84.6 in early September, the highest reading since July 2013, from 82.5 in August.

%VIRTUAL-WSSCourseInline-876%August's increase in retail sales, which account for a third of consumer spending, was in line with economists' expectations. July's retail sales were previously reported to have been flat.

So-called core sales, which strip out automobiles, gasoline, building materials and food services, and correspond most closely with the consumer spending component of gross domestic product, increased 0.4 percent in August.

The dollar held near a six-year high against the yen, while U.S. Treasuries' prices extended losses after the data. U.S. stocks were trading lower, with the S&P 500 retail index down 0.15 percent.

August's increase in core retail sales followed an upwardly revised 0.4 percent gain in July, which was previously reported as a 0.1 percent rise. While core retail sales were up 4.1 percent in the 12 months through August, they remain well below their pre-recession growth pace of about 5.5 percent.

Even with the increase in August, retail sales are lagging other relatively bullish economic data such as manufacturing, housing and employment. Strong gains in consumer confidence are yet to translate into robust sales growth.

"There might be some pressure from the lack of real wage growth," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

Still, the solid gains in core retail sales in July and August bode well for economic growth this quarter, with some analysts predicting output could top a 3.5 percent annual pace. The economy grew at a 4.2 percent pace in the second quarter.

Auto Sales Accelerate

In August, receipts at auto dealerships jumped 1.5 percent after advancing 0.6 percent the prior month. While sales at service stations fell 0.8 percent, that reflected declining gasoline prices, which should free up income and support discretionary spending in the months ahead.

Sales at clothing retailers gained 0.3 percent and receipts at sporting goods shops increased 0.9 percent.

Sales at electronics and appliance stores rose 0.7 percent, while receipts at building materials and garden equipment suppliers rebounded 1.4 percent. Sales at non-store retailers, which include online sales, edged up 0.1 percent.

A separate report from the Labor Department showed import prices recorded their biggest drop in nine months in August as a sharp decline in the cost of petroleum products eclipsed rising food prices, keeping imported inflation pressures subdued.

Import prices fell 0.9 percent last month after slipping 0.3 percent in July. In the 12 months through August, prices dropped 0.4 percent.

-With additional reporting by Richard Leong in New York.

Originally published