Retail sales in U.S. rose in August

Sales at retailers climbed in August at the fastest pace in four months and prior readings were revised up, boosting prospects for U.S. economic growth this quarter.

The 0.6 percent gain matched the median forecast of 82 economists surveyed by Bloomberg and followed a 0.3 percent increase the prior month that was stronger than previously reported, Commerce Department figures showed today in Washington. Eleven of 13 major categories showed advances, led by auto dealers and building material stores.

More hiring, stock-market gains and cheaper prices at the gas pump put Americans in the mood to shop, providing a lift to the expansion that's now in its sixth year. Faster wage growth would provide a bigger boost for consumer spending, which accounts for almost 70 percent of the economy.

"The momentum in sales is fairly positive," Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC in New York, said before the report. "Increases in confidence and employment argue for more gains in consumer spending."

Stock-index futures held earlier losses after the report. The contract on the Standard & Poor's 500 Index maturing in December fell less than 0.1 percent to 1,987.6 at 8:34 a.m. in New York.

Survey Results

Estimates in the Bloomberg survey ranged from advances of 0.1 percent to 1.2 percent. July retail sales were previously reported as little changed from a month earlier. June was revised up to show a 0.4 percent increase from a previously reported 0.2 percent gain.

Sales climbed 1.5 percent at automobile dealers, the best showing since March, after a 0.6 percent increase the prior month.

Industry figures indicate Americans continue to spend on vehicles. Sales of cars and light trucks rose to a 17.5 million annualized rate in August, the highest since January 2006, from a 16.4 million pace a month earlier, according to data from Ward's Automotive Group.

"We're going to close out the year with the highest production plan we've had in seven years," Bill Fay, Toyota Motor Corp.'s U.S. sales chief, said on a conference call this month. "Consumer confidence is up, spending growth is out there in the marketplace, interest rates are stable, fuel prices are stable. It's pretty darn close to ideal."

Ex Autos

Retail sales excluding autos increased 0.3 percent in August for a second month, today's report showed. That matched the median forecast of economists surveyed by Bloomberg.

Spending increased 1.4 percent at building-material stores, 0.7 percent each at furniture and electronic merchants and 0.9 percent at sporting goods outlets, today's report showed.

Two categories showed weakness with sales declining at service stations and general merchandise chains, which include department stores. The Commerce Department's retail sales data aren't adjusted for prices, so the drop at gasoline stations may reflect lower costs at the pump.

Regular gasoline sold at an average $3.42 a gallon as of Sept. 10, the lowest in more than six months, according to AAA, the biggest U.S. motoring group. Lower fuel prices are freeing up money for consumers to spend elsewhere.

Another report today showed a decline in the cost of oil helped push down prices of imported goods by 0.9 percent, the most since November, according to figures from the Labor Department. Compared with the same month last year, import prices fell 0.4 percent.

Imported Fuel

The 4.6 percent drop in the cost of imported fuel last month was the biggest since June 2012, the report showed.

The Commerce Department's retail report showed sales excluding autos, gasoline and building materials, which render the figures used to calculate gross domestic product, climbed 0.4 percent in August for a second month. The July reading was revised up from the 0.1 percent previously estimated, which will probably prompt some economists to raise growth forecasts.

Target Corp., the second-largest U.S. discount chain, is among those seeing early signs of an improvement in demand.

"While it's still early, we have been pleased with the results so far in the back-to-school and back-to-college season, in which we have seen improved sales trends from guests focused on the occasion rather than promotions," Kathee Tesija, chief merchandising and supply chain officer of Minneapolis-based Target, said on an Aug. 20 earnings conference call.

August Payrolls

Employers were more judicious in their hiring last month, adding 142,000 workers to payrolls, after a six-month hiring burst that has put more than 1.4 million Americans to work. The unemployment rate fell to 6.1 percent from 6.2 percent.

Federal Reserve policy makers, who meet next week, have noted the improvement in the economy even as they indicated they are in no rush to begin raising interest rates. Chair Janet Yellen has drawn attention to the sluggish pace of wage growth.

"There has been little evidence of any broad-based acceleration in either wages or compensation," Yellen said in an Aug. 22 speech at the Kansas City Fed's economic conference in Jackson Hole, Wyoming.

Confidence surveys showed mixed results recently. The Bloomberg Consumer Comfort Index declined last week to the worst reading since the beginning of August. In contrast, the Conference Board's index of confidence climbed in August to the highest level in almost seven years, and the Thomson Reuters/University of Michigan final sentiment gauge also rose.

Growth Estimates

The economy will expand at a 3 percent annualized rate in this quarter and in the final three months of the year, according to a Bloomberg survey released yesterday.

Another report yesterday signaled consumer spending from April through June was stronger than previously estimated.

Revenue at health-care providers rose 3 percent in the second quarter after a drop in the previous three months, according to the Census Bureau's quarterly data on service industries that aren't adjusted for seasonal swings or price changes. The report prompted several economists to raise projections for gross domestic product growth in the period, which was reported as a 4.2 percent rise.

--With assistance from Chris Middleton in Washington.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1bloomberg.net To contact the editor responsible for this story: Carlos Torres at ctorres2bloomberg.net