US retail sales rebounded in July but posted a smaller-than-expected gain while lines for jobless benefits shrank for a second straight week, government reports showed yesterday.
The Commerce Department said retail sales rose 0.7 per cent in July to a seasonally adjusted $336.50 billion, less than economists had expected but a rebound from the revised 0.5 per cent decline in sales in June.
July purchases excluding autos were up only 0.2 per cent, their smallest gain since an outright decline in April. Ex-auto sales in June were revised to a 0.3 per cent gain from a 0.2 per cent drop.
Wall Street analysts had expected a stronger gain of 1.1 per cent in July and a 0.4 per cent increase outside of auto sales.
Financial markets took the data in stride, as the dollar weakened slightly against the euro, while US Treasury debt prices rallied initially but then fell back.
In a separate report, the Labour Department said claims for jobless benefits fell 4,000 to 333,000 last week. Wall Street had instead expected claims to rise to 338,000.
The retail figures reflected a mixed picture of consumer spending, which accounts for about two-thirds of overall US economic activity. With June sales revised up from the previously reported 1.1 per cent decline, the "soft patch" in spending noted by Federal Reserve Chairman Alan Greenspan and others was not as deep as believed.
However, the smaller-than-expected July rebound showed shoppers still trying to cope with higher energy prices and stagnant wage growth.
"We should see some upward revisions in the consumption numbers that we've seen. This is better momentum going into the third quarter," said Stephen Gallagher, chief US economist with S.G. Cowen Securities in New York.
Auto sales, boosted by hefty incentives from car makers, surged 2.4 per cent in July, making up most of June's three per cent fall. Sales at furniture and sporting goods stores also rose.
Gas station sales actually fell 0.5 per cent, their biggest decline since October 2003. Economists had expected the dip, however, reflecting somewhat softer prices for gasoline in July. Overall retail sales excluding both cars and gasoline were up 0.3 per cent in July and June.
Wal-Mart Stores Inc., the world's largest retailer, yesterday reported higher-than-expected quarterly earnings as demand for back-to-school clothes and other high-profit items made up for sluggish summer sales.
The retailing titan also expressed optimism about the year, despite soaring oil prices that have crimped consumer spending and contributed to disappointing sales growth in June.
On Tuesday, the Federal Reserve sounded a similar note as it raised short-term interest rates by a quarter-percentage point, expressing hope the summer slowdown was caused by temporarily high energy prices.
"The economy nevertheless appears poised to resume a stronger pace of expansion going forward," Fed officials said in a statement.
In another report yesterday, the Labour Department said import prices rose 0.2 per cent in July, reversing June's 0.1 per cent decline. The gain was pushed by a 0.9 per cent rise in petroleum prices.