Posted on August 14, 2012 at 8:22 AM
WASHINGTON (AP) -- Americans boosted their spending at retail businesses in July by the largest amount in five months, a surge that could help lift the economy out from its slump.
Retail sales rose 0.8 percent in July from June, the Commerce Department reported Tuesday. It was the largest increase since February and followed three months of declines, including a 0.7 percent drop in sales in June.
All major categories rose. Auto purchases increased 0.8 percent. Consumers also boosted their spending on furniture, electronics, building materials and sporting goods.
Stock futures rose after the report was released
The economy has shown some modest improvement in July. Employers added 163,000 jobs, the best month for job growth since February. Stock indexes are near their highs for the year. And consumer confidence rose for the first time in five months. The combination appeared to translate into more spending by consumers.
"Lower gas prices, a nice rally in stocks and stronger job growth ... helped boost consumer spending," said Jennifer Lee, senior economist at BMO Capital Markets. She said the gain represented a good start for the July-September quarter but further improvement in employment would be needed to ensure further gains in consumer spending.
Retail sales totaled a seasonally adjusted $403.9 billion in July, up 21.4 percent from the recession low hit in March 2009.
The retail sales report is the government's first look each month at consumer spending, which drives roughly 70 percent of economic activity.
The economy grew at an annual rate of 1.5 percent from April through June. That's not enough to lower the unemployment rate, which ticked up in July to 8.3 percent.
Overall, consumer spending on goods and services grew only 1.5 percent in the April-June quarter, the slowest pace in a year.
Americans are also saving more. The savings rate -- the percentage of after-tax income that consumers don't spend -- rose to 4.4 percent in June, the highest in a year.