US retail sales surge in May
washington — US retail sales increased more than expected in May as consumers bought motor vehicles and a range of other goods even as they paid more for gasoline, the latest indication of an acceleration in economic growth in the second quarter.
Other data on Thursday showed a further tightening in labour market conditions, with first-time applications for unemployment benefits unexpectedly falling last week and the number of Americans on jobless rolls declining to a near 441/2-year low.
The reports came a day after the Federal Reserve raised interest rates for a second time this year and offered an upbeat assessment of the economy. The US central bank described economic activity as “rising at a solid rate” and the labor market as continuing to “strengthen”. The Fed forecast two more rate hikes in the second half of 2018.
“In short, the Fed was right to upgrade its assessment of economic growth to ‘solid’ in yesterday’s statement,” said Paul Ashworth, chief US economist at Capital Economics in Toronto.
The Commerce Department said retail sales jumped 0.8 per cent last month, the biggest advance since November 2017. Data for April was revised up to show sales rising 0.4 per cent instead of the previously reported 0.2 per cent gain. Economists polled by Reuters had forecast retail sales rising 0.4 per cent in May. Retail sales in May increased 5.9 per cent from a year ago.
Excluding automobiles, gasoline, building materials and food services, retail sales rose 0.5 per cent last month after an upwardly revised 0.6 per cent increase in April. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported to have risen 0.5 percent in April.
The strong retail sales report added to data ranging from the labor market to manufacturing and trade in suggesting the economy was regaining momentum in the second quarter after growth slowed at the start of the year amid a sharp step-down in consumer spending.
Retail sales are being underpinned by a robust labour market, which is gradually boosting wage growth. In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 4,000 to a seasonally-adjusted 218,000 for the week ended June 9. —