Retail Sales: Higher Increase Than Forecasted as Consumers Spend

In May, retail sales increased more than had been forecasted, showing that consumer spending will give a boost to economic growth during the second three months of 2016.

The increase of 0.5% in purchases comes after a jump of 1.3% in April that was the largest gain in almost one year, showed figures released on Tuesday by the U.S. Commerce Department in Washington.

The average forecast by economists projected an increase of 0.3%. Excluding purchases of gasoline and autos, sales were up 0.3%.

Steady increase in consumption helps give acceleration to the economy following a period of lower consumption during the start of 2016, bolstering the forecasts by officials from the Federal Reserve that the slowdown earlier was only temporary.

An increase in wages generated through continued increases in the labor market will help make sure that households remain the focus of the economy expanding.

This has been a strong second quarter of spending by consumers, said a chief economist in Pittsburgh with PNC Financial Services, which has been the top forecaster for retail sales during the  last two years.

This adds to growing evidence that the U.S. economy is bouncing back solidly.

Estimates from a survey of economists were for gains of a low of 0.1% to a high of 0.7%. Data for retail sales in March as well as April were not revised.

Nine out of the 13 major categories saw increases in May for demand compared to April, led by a jump of 1.3% at retailers that are non-store, which includes merchants online.

Sales also increased 1.3% for sporting goods along with an increase of 0.8% for clothing stores, marking the largest advance since last November.

Sales at auto dealers increased by 0.5% during May after they soared by 3.1% for April. That however was online with earlier figures in June that showed vehicle sales in the U.S. were little changed during May from April.

Gasoline station receipts increased 2.1% in May, the report on retail sales showed. The Department of Commerce’s data on retail sales are not adjusted for any prices, so higher costs of fuel can boost receipts for gasoline.

Cost of one gallon of gasoline on averaged was $2.38 on June 10, which is the highest average price since last September.

Figures uses for the calculation of the gross domestic product, which excludes categories like auto dealers, food services, service stations and home improvement stores was up 0.4% during May after increasing a full 1% during April.