Washington, D.C. August 11, 2006--Retail sales rose higher than expected--up 1.4 percent--in July, according to the Department of Commerce. The growth was partly due to strong auto and gas station sales.
July's was the largest monthly increase since January, according to the Commerce Department. Excluding motor vehicles and parts, retail sales rose 1.0 percent, again the biggest rise since January and exceeding the 0.5 percent increase Wall Street economists had forecast.
Economists said the data indicated the consumer, a major driver of the economy, was still spending, despite rising gasoline prices and signs of a slowdown in the housing market.
"This blockbuster surge in sales strongly suggests that the economy may not be slowing as much as the central bank had anticipated when it opted to pause its rate-hiking cycle," said Anthony Chan, managing director and chief economist at JPMorgan Private Client Services in New York.
Federal Reserve policy-makers earlier this week decided to keep the target federal funds interest rate steady at 5.25 percent after more than a two-year stretch of rate hikes on views the economy may be starting to slow enough to crimp inflationary pressures.
U.S. treasury debt prices slipped after the report with the benchmark 10-year note down 5/32 in price to yield 4.959 percent, while the dollar edged higher
The July jump, driven by increased auto and gasoline sales, topped a consensus target among Wall Street economists for a 0.8-per-cent rise, the report said. The monthly increase came on the heels of a 0.4-per-cent drop in June, which was revised down 0.2 per cent from the earlier estimate.
Michael Gregory, a senior economist at BMO Nesbitt Burns Inc., said the July spending burst was the "last gasp" of the U.S. consumer.
"With many states running ‘tax holidays' in August to spur back-to-school and other sales, this month's retail figures will also look good," he said in a note. "But with consumer confidence buckling, job growth continuing sluggish and mortgage equity withdrawal dwindling, sprite July-August sales merely portends even deeper autumn doldrums."
