US retail sales up as economy sees gains
US retail sales rose in May as Americans bought automobiles and a range of other goods, even as they paid more for gasoline, suggesting that economic growth was gaining steam despite a sharp slowdown in job creation.
Other data yesterday hinted at a steady build-up of inflation pressures, with import prices recording their largest increase in just over four years in May as the drag from a strong dollar and lower oil prices fades.
The signs of fairly healthy domestic demand and rising imported inflation could attract the attention of officials at the Federal Reserve, who were due to gather for two-day meeting yesterday. While May’s weak employment report has all but ruled out an interest rate rise at this meeting, the steady flow of upbeat economic reports keeps a hike in July on the table.
“This won’t spur the Fed to raise interest rates tomorrow, but it could cast a more positive tone on the statement ... setting the stage for an increase in July,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.
The Commerce Department said retail sales added 0.5 percent last month after surging by an unrevised 1.3 percent in April. The second straight month of gains boosted sales 2.5 percent from a year ago.
Excluding automobiles, gasoline, building materials and food services, retail sales rose a solid 0.4 percent last month after a revised 1 percent gain 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 0.9 percent in April.
The broad increase in retail sales last month suggests the economy has regained momentum after growth slowed to a 0.8 percent annual rate in the first quarter.
Strong sales are also helping businesses to reduce an inventory overhang, which could boost future production. In a second report, the Commerce Department said inventories gained 0.1 percent in April after rising 0.3 percent in March.
In a third report, the Labor Department said import prices increased 1.4 percent last month, the largest rise since March 2012, after advancing 0.7 percent in April.
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