Strong U.S. retail sales brighten economic outlook
(Adds business inventories, analyst comments; updates markets)
* Retail sales rise 0.5 percent in June
* Core retail sales unchanged; May revised higher
* Business inventories increase 0.4 percent in May
By Lucia Mutikani
WASHINGTON, July 16 (Reuters) - U.S. retail sales rose
solidly in June as households boosted purchases of automobiles
and a range of other goods, cementing expectations for robust
economic growth in the second quarter.
Signs of a strengthening economy, together with a tightening
labor market and firming inflation, likely will keep the Federal
Reserve on track to continue raising interest rates this year.
Fed Chairman Jerome Powell offered an upbeat assessment of
the economy last Friday, telling lawmakers that "over the first
half of this year, overall economic activity appears to have
expanded at a solid pace." The U.S. central bank raised interest
rates in June for the second time this year and has forecast two
more rate hikes by the end of 2018.
"This puts the economy in a very, very good position as it
starts its tenth year of forward movement in July," said Chris
Rupkey, chief economist at MUFG in New York. "This strengthening
economy gives the Federal Reserve the green light to raise rates
a third time this year at their September meeting."
The Commerce Department said on Monday that retail sales
increased 0.5 percent last month. Data for May was revised
higher to show sales rising 1.3 percent instead of the
previously reported 0.8 percent gain.
May's gain in retail sales was the largest since September
2017. Economists polled by Reuters had forecast retail sales
rising 0.5 percent in June. Retail sales in June increased 6.6
percent from a year ago.
Excluding automobiles, gasoline, building materials and food
services, retail sales were unchanged last month after an
upwardly revised 0.8 percent increase in May.
These so-called core retail sales correspond most closely
with the consumer spending component of gross domestic product.
Core retail sales were previously reported to have risen 0.5
percent in May.
Given the upward revision to May's data, the unchanged
reading in core retail sales last month likely does not change
views that consumer spending accelerated in the second quarter.
Consumer spending, which accounts for more than two-thirds
of U.S. economic activity, braked sharply in the January-March
period, growing at its slowest pace in nearly five years.
The dollar pared losses against a basket of currencies after
the data, while stocks on Wall Street were
flat. U.S. Treasuries were lower, with the yield on the interest
rate-sensitive two-year note rising to its highest
level since August 2008.
ROBUST GROWTH FORECAST
In addition to the solid retail sales data, a sharp
narrowing of the trade deficit in April and May has also
bolstered expectations of a strong GDP reading for the second
quarter. Second-quarter growth expectations were also boosted by
another report from the Commerce Department on Monday showing
business inventories increased 0.4 percent in May.
Growth estimates for the April-June quarter are as high as a
4.9 percent annualized rate. The economy grew at a 2.0 percent
pace in the first three months of 2018. The government will
publish its snapshot of second-quarter GDP later this month.
Separate data from the New York Fed on Monday showed a
slight moderation in factory activity in New York state in July
amid a pullback in new order growth and shipments. Factory
employment in the region remained solid this month.
A strong labor market should underpin consumer spending.
In June, auto sales increased 0.9 percent after advancing
0.8 percent in May. Receipts at service stations rose 1.0
percent on higher gasoline prices.
Sales at building material stores increased 0.8 percent last
month after surging 2.5 percent in May. Online and mail-order
retail sales jumped 1.3 percent, the biggest gain since November
2017, after rising 0.4 percent in May.
Receipts at furniture stores rebounded 0.6 percent. Sales at
restaurants and bars increased 1.5 percent in June.
But receipts at clothing stores fell 2.5 percent, the
biggest drop since February 2017. There were also decreases in
sales at supermarkets, electronics and appliance stores, as well
as general merchandise stores.
Spending at hobby, musical instrument and book stores
declined further, falling 3.2 percent. That was the largest drop
since December 2017.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Dan
First Published: 2018-07-16 15:07:00
Updated 2018-07-16 16:24:03
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