Retail sales rise points to pickup in spending

Bloomberg NewsAugust 13, 2013 

— Retail sales rose in July for a fourth consecutive month, showing American households are regaining momentum as employment climbs.

The 0.2 percent increase in purchases followed a 0.6 percent June gain that was larger than previously reported, Commerce Department figures showed Tuesday in Washington. The numbers in the report that feed into gross domestic product climbed by the most this year, prompting some economists to boost growth estimates.

More jobs and rising household wealth tied to higher home values and stock prices are boosting confidence and triggering improving sales at companies such as Michael Kors Holdings Ltd. A pickup in consumer spending, which accounts for about 70 percent of the economy, would help counter the fiscal headwinds of government cutbacks that have held back growth.

“We’re seeing sales pick up in multiple categories – that’s a promising sign that consumer spending might be a little bit stronger in the third quarter,” said Michael Brown, an economist with Wells Fargo Securities in Charlotte. “We’ve seen wage and salary growth continue to expand with the pace of employment. That’s helped support some additional consumer activity.” Wells Fargo is the top forecaster of retail sales, according to data collected by Bloomberg.

Another Commerce Department report Tuesday showed inventories at U.S. companies were little changed in June as sales improved, signaling orders to manufacturers will be growing. Merchants had enough goods on hand to last 1.29 months at the current sales pace in June, matching the previous month. The last time the ratio was lower was a year ago.

Nine of 13 major retail categories showed gains last month, led by clothing and general merchandise stores.

“Consumers are still able to go out there and spend despite headwinds from tax increases and the sequester,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Conn. “Job growth is continuing at a moderate clip and we’re making gradual headway.”

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