Credit Commentary

US retail sales up again in June

By Zarana on Wednesday, July 15 2009

Retail sales advanced in June by the largest amount in five months, led by a surge in gasoline prices and a slight rebound in the feeble auto sector. Commerce Department data on Tuesday showed sales at U.S. retailers rose 0.6% from a month earlier, ahead of economists' expectations for a 0.4% advance.

Gasoline stations showed strong gains, helped by rising oil prices. The average price per gallon of gas rose to $2.68 in June from $2.32 in May, according to government data, while car and auto parts sales added 2.3%.

However, outside of autos and gas stations the sales results were disappointingly weak, indicating consumers remained wary of stepping up discretionary spending despite signs the recession may be drawing to a close. To sum up, Retail sales looked mixed, the auto sector had a huge month but the other sectors were off the track.

Sales at general merchandise stores, the category that includes nationwide department store chains and giant retail chains such as Wal-Mart Stores Inc., fell by 0.4 percent following an even bigger 1.7% decline in May. Sales at specialty clothing stores were flat last month.

This dismal showing reflected a report last week showing lackluster chain store sales. Consumers appeared to be shopping for necessities and seeking discounts, buoying discounters but punishing brands like Abercrombie & Fitch. That chain’s same-store sales fell 32% in June, more than expected. American Eagle Outfitters Inc. reported a drop of 11%.

Separate figures from the Labor Department showed that US wholesale prices increased in June. Its Producer Price Index (PPI) rose by 1.8%. Excluding food and energy bills, core wholesale prices were 0.5% higher.

While a recent study said consumer confidence rose last month to a 16-month high, official figures also released this month showed that US unemployment increased more than analysts had expected in June. High unemployment keeps wages in check. Energy prices, the primary cause of last month's rise in inflation, have come down in the past two weeks, which should help cool prices.

Many economists, however, believe that the economy is in the process of stabilizing after a steep nosedive at the end of last year and first three months of this year. Many are forecasting that the overall economy, as measured by the gross domestic product, will begin growing again this July-September quarter.
 

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