US retail sales posted an unexpectedly strong advance in July, as spending on a broad array of items shot up, the US government said today in a report that bolstered hopes of a faster economic recovery.
Total retail purchases rose 1.4 per cent last month to $317.19 billion after an upwardly revised 0.9 per cent gain a month earlier, the Commerce Department said.
Auto dealerships saw sales rise by a hefty 3.2 per cent in July, but even stripping motor vehicles out of the equation, retail sales increased a solid 0.8 per cent.
The dollar strengthened on the data, and the bond market, which had fallen earlier as it braced for a strong retail sales number, showed little reaction.
Wall Street economists had expected sales to rise 0.9 per cent overall and 0.5 per cent excluding autos.
The data may make the Federal Reserve breathe a sigh of relief as the 13 interest rate cuts it has made since early 2001 appear to be paying dividends.
Yesterday the Fed opted to leave overnight rates at a 45-year low of 1 per cent and said rates were likely to stay low for "a considerable period" in an effort to diminish the risk of an unwanted fall in prices.
The US economy, which grew at an anemic annual pace of just 1.4 per cent in both the final quarter of last year and the first three months of 2003, accelerated to a moderate 2.4 per cent rate in the second quarter.
Many economists look for growth at a 3.5 per cent pace or better through the rest of the year and for 2004.