August Retail Sales Surge 0.8%; Job Growth Is Cited as a Factor
Retail sales surged over a broad front last month after a quiet July. A government report said the economy is expanding at a healthy pace, with only moderate inflationary pressures.
Americans bought cars, home furnishings and back-to-school supplies in August, the Commerce Department said Wednesday, and sales rose 0.8% after being flat the previous month.
Analysts said the buying was stimulated by job growth and that there is still steam left in the consumer-driven expansion.
“The report is really quite positive for the economy,” said economist Lynn Reaser of First Interstate Bancorp in Los Angeles. “The consumer has definitely not stalled out.”
“The economy has nine lives, and maybe there are a couple of more to go,” said Sung Won Sohn of Norwest Corp. in Minneapolis.
The optimism was bolstered by a Federal Reserve Board report on its survey of business conditions around the country.
“Economic activity continued to expand through the summer,” it said. “Regions that have been lagging are generally said to be doing better, while most of the stronger areas saw growth plateau.”
The survey, conducted by the Fed’s 12 regional banks, found higher interest rates having an impact, particularly by slowing home construction.
The so-called beige book report said spending is slowing but remains strong and that retailers look forward to a good holiday shopping season this year.
The Fed, which has boosted short-term interest rates five times this year to head off inflation, was fairly optimistic about prices.
“There are more reports of tightening labor markets than before, though wage pressures are still described as modest,” the report said. “Industrial materials prices edged up further, but businesses say that competitive pressures continue to restrain price increases on finished goods.”
Analysts said they expect the Fed to raise interest rates again, but not until its November meeting--after the elections.
Retail Sales
Seasonally adjusted, in billions of dollars:
August 1994: $186.6
Source: Commerce Department
