Retail Sales in July Exceed Forecasts

Consumer spending remained robust in July, pushing U.S. retail sales well above forecasts, as shoppers splurged on automobiles, appliances and garden equipment, the government said Wednesday.

Retail sales in July climbed 1.4% from the previous month to $317.2 billion, according to a preliminary tally by the Commerce Department.

The increase was the largest in four months. The department also revised upward the results for May and June.

The strong retail sales results for July indicated that consumer spending, the largest element in economic growth, was holding up relatively well even as the rest of the economy remained sluggish, analysts said.

Federal tax rebates might spur more spending in the months ahead.

“There has been a sharp acceleration in spending over the past several months as the worries associated with the war in Iraq have faded,” said economist Steven A. Wood in a report for Insight Economics.

The biggest increase was reported in motor vehicle sales, which rose 3.2% from the previous month as consumers took advantage of automaker rebates and financing deals.

Retail sales excluding motor vehicles rose 0.8%. Sales surged 1.2% at appliance and electronic stores and were up 1.3% at garden center and hardware stores. However, sales dropped 1.5% at retailers of sporting goods, books and music.

In a separate report, the Commerce Department said business inventories rose slightly in June, but a better pace of sales pushed down the inventory-to-sales ratio, a measure of how long it would take to clear shelves at the current sales pace.

That measure is hovering near all-time lows, implying businesses may soon need to ramp up production to meet demand, which would offer another fillip to growth.

Reuters was used in compiling this report.