Vehicle Purchases Boost Retail Sales a Bigger-Than-Expected 0.7%

Americans snapped up cars and light trucks last month at a brisk clip that helped push overall retail sales up by a bigger-than-expected 0.7%.

The Commerce Department reported Thursday that total retail sales, which represent about a third of the nation’s economic output, rose last month to a seasonally adjusted $248.7 billion.

Sales were 9.1% higher than in July of last year.

“It was Christmas in July,” said economist Richard Yamarone with Argus Research Corp. Record heat in many parts of the country drove people into air-conditioned showrooms and stores, where they made purchases, he said.

Sales of new cars and light trucks increased by 2.3% in July, contrasted with a drop of 0.8% in June. The auto industry predicts record sales this year.

Among the reasons cited by Paul Taylor, chief economist with the National Automobile Dealers Assn., were strong demand for mid-sized luxury sedans and sport-utility vehicles; manufacturers’ rebates; and a strong economy that makes people feel comfortable about spending money.

Some economists said the retail sales report gives the Federal Reserve more ammunition to justify a second increase in interest rates Aug. 24.

But others took heart in another number in the report: Excluding auto sales, retail sales rose just 0.3% in July, slightly less than many analysts’ expectations of a 0.4% rise, and a possible sign that overall retail sales may be moderating, said economist David Levy of the Levy Institute Forecasting Center.

The gain in overall retail sales followed a revised 0.2% decline in June. Last month, the government estimated retail sales actually rose 0.1% in June.

With unemployment near a three-decade low, growth in wages and benefits and a strong stock market, consumers are continuing to feel confident.

In a separate report Thursday, the Labor Department said that the number of Americans filing for unemployment benefits last week rose by 4,000 to 284,000. But the four-week moving average, which smooths out week-to-week volatility, fell to 288,250, its lowest point in more than a decade. Economists consider any claims level below 300,000 to be an indication of an extremely tight labor market.

The retail report showed that sales of durable goods--items expected to last at least three years--rose 1.6% in July. Sales of nondurable goods, such as food and fuel, went up 0.2%.

Sales at furniture stores remained flat. Sales at general merchandise stores, the category that includes department stores, increased 1% in July. At apparel and accessory shops, sales fell 0.4% in July.