Retail sales show broad-based increase in June

WASHINGTON – Retail sales showed a broad-based gain in June, which probably helped the U.S. economy rebound in the second quarter.

Purchases increased 0.2 percent after a 0.5 percent advance in May that was larger than previously reported, Commerce Department figures showed Tuesday in Washington. The reading fell short of the 0.6 percent increase projected by the median estimate of 83 economists surveyed by Bloomberg, restrained by a drop among auto dealers. Demand climbed in nine of 13 major categories last month.

Consumers are more comfortable opening their wallets as a strengthening labor market lifts earnings. Higher wages give American households the wherewithal to withstand recent increases in food and gasoline costs that had chipped away at buying power.

“We’re quite likely to see a pickup in consumer spending in the second half of the year from the stronger jobs numbers,” David Berson, chief economist at Nationwide Insurance in Columbus, Ohio, said before the report. “The strong job numbers mean there’s an increase in wages in the aggregate and a lot of it’s going to get spent.”

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Estimates in the Bloomberg survey ranged from gains to 0.2 percent to 1.1 percent. May’s reading was revised from an initially reported 0.3 percent increase.

Clothing stores, general merchandise merchants and non-store retailers, which include online vendors, were among the major retail categories showing gains last month, Tuesday’s report showed.

Further healing in the labor market is giving households the wherewithal to spend. Employers added 288,000 jobs in June, lifting the average monthly advance so far in 2014 to almost 231,000. If that pace is sustained, job gains this year would be the best since 1999. The jobless rate dropped last month to an almost six-year low of 6.1 percent.

The sales data for last month was held back by an unexpected 0.3 percent drop for auto and parts dealers. The figures, which aren’t used in calculating GDP, were at odds with industry data.

Cars and light trucks sold at a 16.9 million annual pace in June, the strongest since July 2006, according to Ward’s Automotive Group. Deliveries at General Motors Co. and Ford, the two largest U.S. automakers, exceeded analysts’ estimates. The government uses these industry figures in calculating growth.

Excluding cars, sales climbed 0.4 percent in June for a second month.

“The labor market is achieving somewhat better footing” and “housing data in May were showing some signs of revival,” Ellen Hughes-Cromwick, chief economist at Dearborn, Mich.-based Ford Motor Co., said on a July 1 sales call. “We’ve seen very good improvements in manufacturing activity. Consumer sentiment has been in good stead and incomes are gaining ground.”

Core sales, the figures used to calculate gross domestic product and which exclude such categories as autos, gasoline stations and building materials, increased 0.6 percent last month, the best showing since March, after a revised 0.2 percent increase in May that was bigger than previously reported. The prior month had initially been recorded as unchanged.

U.S. same store sales rose 5.9 percent in June from a year earlier, according to the International Council of Shopping Centers.

Sluggish income growth that’s lagging behind inflation is holding back the consumer spending that makes up about 70 percent of the economy. Wages posted a 2 percent year-over-year increase in June, matching the average since the recession ended five years ago. Consumer prices climbed faster than that in May, the latest data available, at 2.1 percent.

The world’s largest economy shrank at a 2.9 percent annualized rate in the first quarter, in part because an unusually harsh winter restrained consumer spending, figures from the Commerce Department show. GDP is projected to have grown at a 3.3 pace last quarter and at an average 3.1 percent rate in the second half of the year, according to the median forecast of economists surveyed by Bloomberg this month.

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