Retail Sales Up Surprising 1.1 Percent

WASHINGTON – Shoppers energized by warm weather and favorable incentives sprung back to life in June, driving up sales at the nation's retailers by 1.1 percent.

The bigger-than-expected increase came after consumers took a breather in May and sent retail sales down by 1.1 percent, the Commerce Department reported Friday. Many analysts were forecasting a 0.7 percent rise for June.

Consumers — whose spending accounts for two-thirds of all economic activity in the United States — splurged last month, snapping up cars, clothes, and electronics and appliances. They ate out more, too.

The 1.1 percent rise was the largest since April.

Friday's report offers a dose of good news for the unfolding economy recovery, which has lost steam since the beginning of the year and has hit some rough spots.

Some economists worry that the wave of accounting scandals that has shaken confidence in corporate America, the sour stock market and a sluggish job market could chill consumers' willingness to spend and businesses' willingness to step up capital investment. Deep cuts to capital investment were a key force behind the economy's slide into recession last year.

As the economy claws its way back to health, it will be the behavior of consumers and businesses who will ultimately shape the recovery.

Citing concerns about the vitality of the economy's comeback, the Federal Reserve has opted at each of its four meetings this year to hold short-term interest rates at 40-year lows. Policy-makers hope low rates will encourage consumers to spend and businesses to invest and help along the rebound.

A growing number of economists believe the Fed might leave rates unchanged through the rest of the year.

In June, more aggressive incentives helped to lure Americans back to automobile showrooms and pushed up sales at automobile dealerships by 3.4 percent. That was the largest increase since October, when sales shot up by a record 22.6 percent.

In May, automobile sales fell by 3.2 percent, prompting some companies to offer more generous promotions. Some big car makers recently announced they'll once again provide zero-percent financing in hopes of boosting sales.

Excluding automobile sales, overall retail sales rose by 0.4 percent in June — largely in line with analysts' expectations.

At clothing stores, sales rose 2 percent in June, after dropping by 2.1 percent the month before. That was the largest increase since December. Electronics and appliances stores saw sales go up by 0.8 percent, on top of a 1.5 percent advance in May.

General merchandise stores, including department stores, reported a 1.1 percent increase in sales in June, compared with a 0.8 percent decline in May.

Sales of health and beauty products edged up 0.2 percent, after dipping 0.6 percent. Sporting goods stores saw sales nudge up 0.1 percent, down from a 0.9 percent advance.

At bars and restaurants, sales rose 0.5 percent in June, after dipping 0.1 percent in May.

Sales at gasoline stations nosed down by 0.1 percent in June, after falling by 2.4 percent. And, at building and garden supply stores, sales went up 0.1 percent, following a drop of 0.6 percent.

On Thursday, the nation's biggest retailers also reported a rebound in June from a lackluster spring. Discounters and moderate-priced stores once again had the best performance.