WASHINGTON -- Retail sales rose in July for a fourth consecutive month, showing the U.S. economy is breaking free of the effects of higher taxes and federal budget cuts.
The 0.2 percent increase followed a 0.6 percent gain in June that was larger than previously reported, according to Commerce Department figures issued today in Washington. The median forecast of 81 economists surveyed by Bloomberg called for a 0.3 percent advance. The measure of demand that feeds into gross domestic product climbed by the most this year.
Employment gains and rising household wealth tied to higher home values and stock prices are giving Americans the confidence to spend, triggering improving sales at companies such as General Motors Co. and Ford Motor Co. A pickup in household purchases would help counter the fiscal headwinds of taxes and government cutbacks that have held back the world’s largest economy this year.
“Consumers are still able to go out there and spend despite headwinds from tax increases and the sequester,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Conn., which accurately forecast the growth in retail sales. “Job growth is continuing at a moderate clip and we’re making gradual headway.”
Stock-index futures held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in September advanced 0.1 percent to 1,689.3 at 8:43 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 2.68 percent from 2.62 percent late yesterday.
Estimates in the Bloomberg survey ranged from a drop of 0.1 percent to a 0.8 percent gain. The reading for June was revised from an initially reported 0.4 percent increase.
Nine of 13 major categories showed gains last month, led by clothing and general merchandise stores.
Purchases excluding autos, gasoline and building materials, which render the figures used to calculate GDP, advanced 0.5 percent last month, the most since December, after increases of 0.1 percent in each of the previous two months.
Spending advanced 0.9 percent at clothing chains and 0.4 percent at general merchandise stores, today’s report showed.
Sales at automobile dealers fell 1 percent after rising 2.9 percent the prior month, today’s report showed. The figures don’t always track the industry data used to calculate economic growth because they can be influenced by prices.
Cars and trucks sold at a 15.7 million annualized rate last month after a 15.8 million pace in June, the strongest back-to- back readings since the end of 2007, according to figures from Ward’s Automotive Group.
“There’s still significant upside potential for cars,” Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report. “The volume of sales was so abnormally low over the past five years that there’s a lot of catch up to be done.”
Improving sales have led GM, Ford, Chrysler Group LLC, and Honda Motor Co. to boost capacity. Chrysler is adding almost 300 jobs at a Michigan engine plant and Honda will invest $215 million at facilities in Ohio.
“We’re at the beginning of a broad-based recovery for the economy in auto retail,” said Michael Jackson, chairman and chief executive officer of AutoNation Inc., in Fort Lauderdale, Fla. The largest U.S. auto-dealership group last month reported record earnings per share in the second quarter. “As we look at the rest of 2013, we believe that the improvement in new vehicle sales will continue,” Jackson said on a July 18 earnings call.
Today’s report showed some weakness in housing-related categories as sales at furniture, appliance and building material stores declined.
Areas showing gains included restaurants and bars, grocery stores and sporting goods outlets. Within general merchandise, department stores showed a 0.6 percent increase in sales last month, the biggest since March 2012.