U.S. retail sales, industrial output data suggest strong Q2 GDP growth

Fri Jul 15, 2016 1:20pm EDT
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By Lucia Mutikani

WASHINGTON (Reuters) - U.S. retail sales rose more than expected in June as Americans bought motor vehicles and a variety of other goods, bolstering views that economic growth picked up in the second quarter.

Those expectations were further reinforced by other data on Friday showing that industrial production recorded its biggest increase in 11 months in June, driven by a surge in motor vehicle assembly. With domestic demand strengthening, inflation is also steadily rising.

The bullish data and a rally on Wall Street could allow the Federal Reserve to raise interest rates later this year, but much will depend on policymakers' assessment of the impact on the U.S. economy of Britain's June 23 vote to leave the European Union.

"In normal times, this would be enough for the Fed to continue raising interest rates," said Harm Bandholz, chief U.S. economist at UniCredit Research in New York. "But Fed officials want to wait and see if and how Brexit affects the outlook for the U.S. economy before pulling the trigger again."

The Commerce Department said retail sales rose 0.6 percent last month after gaining 0.2 percent in May. It was the third straight month of increases and lifted sales 2.7 percent from a year ago.

Excluding automobiles, gasoline, building materials and food services, retail sales shot up 0.5 percent after a similar gain in May. These so-called core retail sales correspond most closely with the consumer spending component in the gross domestic product report.

Economists had forecast overall retail sales rising only 0.1 percent and core sales gaining 0.3 percent last month.

The better-than-expected rise in core retail sales last month suggested consumer spending increased by at least a 4.5 percent annualized rate in the second quarter, which would be the fastest since 2006, according to economists.   Continued...

Shoppers leave and enter a store in New York January 12, 2012. REUTERS/Eduardo Munoz