U.S. retail sales in July good news for growth

Americans shopped at a healthy pace in July, buying more cars, clothes and appliances, evidence that consumers are helping drive robust economic growth.

Retail sales rose at a 0.5 per cent annual rate in July, after a 0.2 per cent increase the previous month, the Commerce Department said Wednesday. June’s increase, though, was revised lower from a previous estimate of a 0.5 per cent annual rate.

Consumers appear to be feeling upbeat and are in overall solid financial shape. The unemployment rate is near an 18-year low. And economic growth, along with hiring, has accelerated. On average, Americans are saving more, which may encourage future spending.

Sales last month rose at auto dealers and grocery stores and jumped at clothing shops. Americans boosted their spending at restaurants and bars at a 1.3 per cent in July from June. Gas station sales increased at a 0.8 per cent annual rate from a month earlier.

Spending at restaurants and bars has jumped nearly 10 per cent from a year earlier. That’s a bigger increase than for online shopping, which rose 8.7 per cent from a year ago. It also bolsters the notion that many Americans feel they have enough money to spend on nonnecessities.

“Restaurants are a highly discretionary category, and continued strength suggests that households are not too worried about higher gas prices and that tax cuts are providing a cushion against higher expenses at the pump,” Ellen Zentner, an economist at Morgan Stanley, said in a research note.

Department stores, which have suffered falling sales and bankruptcies for much of the past two years, reported a surprisingly healthy sales gain of 1.2 per cent. Macy’s said Wednesday that sales rose unexpectedly in the quarter that ended Aug. 4, its third straight quarterly gain.

The solid spending figures coincide with other data suggesting that American households are in decent financial shape. The government last month revised the savings rate sharply higher, to 7.2 per cent in the first quarter from 3.3 per cent. And fewer people are falling behind on their loans.

More savings could fuel future spending. Before the data was revised, some economists had worried that consumers would have to cut back on their shopping because the savings rate was declining.