BUSINESS

US retail sales rise a modest 0.2 pct. in August on strong demand for autos, furniture

09/13/2013 08:39 EDT | Updated 11/13/2013 05:12 EST
WASHINGTON - Americans boosted their spending at retail businesses only modestly in August, indicating that economic growth remains sluggish. Consumers bought more cars, furniture and electronics last month but held back on most other purchases.

Spending at retail businesses rose just 0.2 per cent last month, the Commerce Department said Friday. It was the smallest gain in four months. But the government said retail spending was stronger in the previous month than first estimated, revising the July estimate to 0.4 per cent from 0.2 per cent

Excluding volatile spending on autos, gas and building supplies, sales in August increased just 0.2 per cent, or less than half July's 0.5 per cent gain.

Consumer may be growing more cautious about spending, a trend that could slow economic growth in the July-September quarter. Slow wage growth, modest job gains and higher taxes have limited Americans' spending power.

Retail sales are closely watched because they're the government's first look each month at consumer spending, which accounts for 70 per cent of economic activity.

"Consumer spending remained stuck in middle gear in the summer," said Sal Guatieri, an economist at BMO Capital Markets.

Guatieri forecasts that spending is growing at an annual rate of roughly 2 per cent in the current July-September quarter, about the same as the previous quarter. That suggests economic growth is slowing to an annual rate of about 2 per cent, down from the 2.5 per cent annual rate that the government estimated for the April-June quarter.

Most economists said the retail sales figures are likely healthy enough for the Federal Reserve to begin cutting back its monthly bond purchases when it meets next week. The Fed is buying $85 billion in Treasury bonds and mortgage-backed securities each month to keep interest rates low and spur more borrowing and spending.

Sales of autos and furniture both jumped 0.9 per cent in August. Electronics and appliance sales rose 0.8 per cent. But clothing sales dropped 0.8 per cent and sporting goods sales also fell.

Last week automakers reported that their sales in August topped 16 million at an annual pace for the first time since November 2007, just before the recession began. Toyota, Ford, Nissan, Honda, Chrysler and General Motors all posted double-digit gains over last August.

But many retailers have said in recent weeks that shoppers have been reluctant to spend freely for back-to-school shopping. According to a tally of 10 retail chains by the International Council of Shopping Centers, sales rose 3.6 per cent last month. That's down from a 6 per cent gain for in August 2012.

Job gains have been steady this year. But the pace of hiring has been too weak to rapidly lower the unemployment rate, which is 7.3 per cent four years after the Great Recession officially ended.