US retail sales in August rise at fastest pace in 3 1/2 years | Shanghai Daily

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September 16, 2009

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US retail sales in August rise at fastest pace in 3 1/2 years

AMERICAN retail sales jumped in August by the largest amount in more than three years, spurred by widespread gains beyond the expected increases of auto sales due to the government's popular Cash for Clunkers program that offered incentives for trading in old vehicles to purchase new ones.

And while inflation at the wholesale level also rose last month as gasoline prices surged the most in a decade, the retail sales report is a sign that consumers may be less cautious about spending as the economy recovers. Consumer spending is closely watched because it accounts for about 70 percent of the nation's economic activity.

The Commerce Department said yesterday that retail sales rose a seasonally adjusted 2.7 percent last month, after falling 0.2 percent in July. That's the largest gain in three and half years and beat analysts' expectations of a 2 percent increase, according to a survey by Thomson Reuters.

Excluding autos, sales rose 1.1 percent, ahead of an expected 0.4 percent jump. Excluding autos and gas, sales rose 0.6 percent.

In a separate report, the Labor Department said wholesale prices rose 1.7 percent in August, more than double the 0.8 percent rise economists expected. Wholesale prices had fallen by 0.9 percent in July.

Both months were heavily affected by energy prices.

Excluding volatile energy and food costs, core inflation as measured by Producer Price Index posted a more modest 0.2 percent increase, close to the 0.1 percent advance economists expected. The index tracks the prices of goods before they reach store shelves.

While many analysts believe the economy is staging a recovery in the current July-September quarter, the rebound is not expected to trigger inflation pressures because the labor market remains weak.

The Commerce Department report showed that auto sales soared 10.6 percent last month, the most in almost eight years due mainly to the clunkers program. Gas station sales rose 5.1 percent, as prices at the pump rose.

Economists expected increases in both categories, but sales also rose at electronics and appliance stores, department and sporting goods stores.

The clunkers program, which ended last month, provided consumers with rebates of up to US$4,500 if they traded in older gas-guzzlers for new, more fuel-efficient models. The incentive boosted car sales 30 percent in August, after a 2.4 percent rise in July.

Many economists expect consumer spending to increase in the current July-September period, after it fell in the second quarter, mostly because of the clunkers program.

That could cause the economy to grow by as much as 3 to 4 percent in the third quarter, helping to end the worst recession since the 1930s.




 

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