US retail sales rebound after two months of decline

Retail sales rose 0.4 percent from June to 362.7 billion dollars on the back of strong auto sales, the Commerce Department said.

The July figure was slightly lower than the 0.5 percent rise expected by most economists but it was the first rise in three months after declines of 0.3 percent and 1.0 percent in June and May respectively.

Sales rose strongly at auto dealers and gas stations while declines were more widespread, but generally modest outside of department stores, the government data showed.

Economists were little impressed by the latest retail data as excluding transactions in auto dealerships and gas stations, “core” sales fell 0.1 percent — reflecting the lackluster state of the world’s largest economy.

“Sales remain restricted by weak fundamentals including few new jobs, low income growth, high unemployment, low and volatile wealth, limited access to credit, and low confidence,” said analyst Scott Hoyt at Moody’s Economy.com.

The retail sales trend “underscores the loss of momentum in consumer spending, with no signs of a turnaround to speak of,” added analyst Aneta Markowska of Societe Generale.

Consumer spending is a key engine of growth for the world’s largest economy, facing slowdown in recovery from a brutal recession that struck in December 2007.

The Federal Reserve on Tuesday warned that US recovery would be weaker than anticipated.

The central bank said after its policy-making Federal Open Market Committee meeting that it was moving to stimulate the economy, like purchasing US Treasury bonds that will help suppress long-term interest rates.

“This recovery needs time so that the damage from the housing and financial sector meltdowns can be healed further and the impression that a slow but steady upturn is sustainable can be created,” said economist Joel Naroff at Naroff Economic Advisors.

“When households and businesses finally accept that gratification will be slow in coming, they will stop being so depressing and spending will return, triggering additional hiring and ultimately a stronger period of growth,” he said.