U.S. retail sales data points to improving economy

Tue Aug 13, 2013 2:05pm EDT
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By Jason Lange

WASHINGTON (Reuters) - U.S. retail sales rose in July, pointing to an acceleration in consumer spending that could bolster the case at the U.S. Federal Reserve for winding down a major economic stimulus program.

Other data released on Tuesday showed that small businesses were more optimistic in July, although companies rebuilt inventories in June at an unexpectedly weaker pace.

Retail sales rose 0.2 percent in July, the Commerce Department said.

While the reading fell short of analysts' expectations, a closely-watched category of sales that strips out cars, gasoline and building materials posted its largest gain in seven months, rising 0.5 percent.

These "core" retail sales usually mirror more comprehensive measures of consumer spending, so Tuesday's report suggests the economy could be regaining steam after tax hikes and federal budget cuts dragged on growth in the first half of the year.

"Households may be spending a bit more freely in response to the recent gains in employment," said Paul Dales, an economist at Capital Economics in London.

The U.S. unemployment rate has fallen nearly a percentage point in the last year, though it remains historically high at 7.4 percent.

The core measure of sales outstripped analysts' expectations, while overall sales fell short largely due to a drop in receipts at auto dealers.   Continued...

A sign is shown in the window of a retail store in San Francisco, California in this file photo taken May 13, 2013. REUTERS/Robert Galbraith/Files