US retail sales in July posted their biggest gain since March, tempering fears that the world's largest economy might be slipping back into recession.
Sales climbed 0.5 per cent, in line with analyst forecasts and following an upwardly revised 0.3 per cent gain in June, according to Commerce Department data released today.
Consumer spending accounts for two thirds of US economic activity, and the data indicates the third quarter was off to a decent start.
Excluding cars, sales increased 0.5 per cent, well above forecasts for a 0.2 per cent gain. The figures were bolstered by a 1.6 per cent jump in gasoline station sales, in part reflecting the higher cost of fuel.
US economic growth was anemic in the first half of the year and unemployment remained elevated, raising worries that the recovery might again falter and triggering speculation that the Federal Reserve might need to resort to additional monetary easing.
Retail sales excluding cars, gasoline and building materials rose 0.4 per cent. Sporting goods stores and department stores fared the worst in an otherwise firm report, with sales dropping 1.5 per cent and 0.8 per cent, respectively.
One month's gain in retail spending was not sufficient to put to rest concerns that the US economy lacks sufficient momentum to create new jobs, particularly with Washington set on cutting spending rather than doing more to stimulate investment and hiring.
Compounding uncertainty, financial markets have been see-sawing this week as investors alternate between seeking opportunity in battered shares prices and fretting that the market could be on the verge of a further dive.
Europe's worsening debt crisis, which has now gone well beyond the so-called periphery and is directly affecting France, has raised the cost of interbank borrowing in money markets, raising the specter of a return to the credit crunch of late 2008.
Global stock markets recovered ground today after a rollercoaster week, but sentiment was still fragile. Investors would be looking to US consumer sentiment figures for August released today for clues into whether the retail spending gains that occurred in July will be sustained as the year progresses.
Economists note that late July and early August were a period of extreme turbulence for the United States as the country faced a political deadlock that pushed it to the brink of default and led to a historic downgrade by Standard & Poor's of the US AAA credit rating.
Reuters