US retail sales increase 0.6 per cent in August, led by spending on autos and restaurants

WASHINGTON – Auto buying drove U.S. retail sales higher in August, a possible sign that job growth in recent months has led to accelerated consumer spending.

The Commerce Department said Friday that seasonally adjusted retail sales rose 0.6 per cent compared with the prior month. Sales are up 5 per cent in the past 12 months. July sales were also revised upward from flat to a 0.3 per cent increase.

Motor vehicles accounted for roughly half of the August increase. Buying also picked up at restaurants and for furniture, electronics, sporting goods and building materials.

Those gains were partially offset by falling sales at gasoline stations and department stores.

The figures suggest that Americans’ reluctance to spend has faded somewhat, even though their wages have yet to increase by much. The increase in retail sales could boost overall economic growth because consumer spending accounts for 70 per cent of the economic activity.

Paul Dales, senior U.S. economist at Capital Economics, said that the sales increase points to stronger economic growth through the end of the year and start of 2015.

“With further jobs gains, rises in income growth and a loosening in credit conditions in the pipeline, consumption growth should strengthen in the fourth quarter and into next year too,” Dales said.

But there are mixed signals from other indicators regarding consumers.

The University of Michigan said its index of consumer sentiment rose to 82.5 in August from 81.8 in July. But much of that increase was due to greater optimism about jobs, rising incomes, and increasing wealth among higher-income groups.

The pace of hiring slipped in August after several months of strong gains.

Employers added just 142,000 jobs last month, well below the 212,000 average of the previous 12 months. The unemployment rate fell to 6.1 per cent, from 6.2 per cent. But that was because more people without jobs stopped looking for one and were no longer counted as unemployed.

The largest drop in hiring last month occurred in retail, which shed 8,400 jobs after gaining 21,000 in July.

Wage gains have been sluggish since the recession ended in 2009 and that’s led many people to be more cautious about spending money. Average hourly pay rose 6 cents to $24.53 in August. That’s only 2.1 per cent higher than a year ago and barely ahead of the overall 2 per cent inflation rate.

Yet consumers felt comfortable enough with their financial situation to ramp up auto buying last month. A stunning 1.58 million motor vehicles were sold last month, giving the auto industry its best August in 11 years, according to a separate measure by Ward’s Automotive. That represented a 5.4 per cent increase in auto buying over the past 12 months.

Chrysler sales soared 20 per cent, while Nissan jumped nearly 12 per cent. Total sales last month ran at an annual rate of 17.5 million, the highest since January of 2006.