US retail sales rose in June as consumers bought more autos and electronics, a sign Americans are spending just enough to keep the 10-year economic expansion going.
"We believe that the soft economy has bottomed," said Lynn Chipperfield, senior vice president and chief administrative officer at Furniture Brands International Inc, the St. Louis-based company that makes the Broyhill, Lane and Thomasville lines.
Retail sales rose 0.2 percent last month after increasing 0.4 percent in May and 1.4 percent in April, the Commerce Department said. Sales excluding autos fell 0.2 percent, dragged down by a price-led drop in gasoline purchases, after a 0.4 percent rise.
Separate reports showing a rise in consumer optimism and the biggest decline in prices paid to producers in more than two years suggest discounting on cars, computers and other goods may keep boosting spending. Consumers buy two-thirds of all goods and services sold in the nation.
The University of Michigan's consumer sentiment index rose to 93.7 this month, the second-highest reading this year, from 92.6 in June.
"Expectations are the key to future spending, so this is another brick in the rising wall of evidence suggesting the economy is turning up," said Ian Shepherdson, chief US economist at High Frequency Economics in Valhalla, New York.
What's more, spending may get a lift once tax-rebate checks are mailed out and the Federal Reserve's six reductions this year in the overnight bank lending rate take hold. Tax rebates of as much as US$600 per household will be mailed starting the week of July 23. Energy prices are starting to fall as well.
Prices paid to factories, farmers and other producers dropped more in June than at any time since February 1999, led by record declines in residential electricity and natural gas costs, the Labor Department said.
The producer price index decreased 0.4 percent after rising 0.1 percent in May. Excluding food and energy, prices rose 0.1 percent after rising 0.2 percent in May. The increase in the core PPI was the smallest in three months.
US government securities rose as the report showed inflation wasn't a threat to the economy's recovery or Fed interest-rate policy. The Treasury's 10-year note rose 1/8 point, pushing down its yield 2 basis points to 5.22 percent. Stocks gained for a third day.
Wal-Mart Stores Inc reported on Thursday that sales at stores open at least a year surged 6.9 percent last month. And consumer appetites for inexpensive goods and services help explain why the economy has avoided recession, even as growth slowed to the weakest pace in a decade.
"America has become a land of bargain hunters," said Kurt Barnard, president of Barnard's Retail Trend Report.
Friday's retail report means sales rose at a 6.1 percent annual rate in the second quarter, compared with a 5.2 percent pace in the first quarter, according to calculations by Bloomberg News.
That may boost calculations of gross domestic product for the second quarter. Analysts project the economy cooled to a 0.6 percent annual growth rate in the second quarter, the slowest since the first quarter of 1993. The economy grew at a 1.4 percent pace from October through March, the slowest six-month period since 1991.
The economic expansion began it's record-setting 11th year in April, even as growth stalled and manufacturing production fell for a seventh straight month. Factory output has declined further since then, though that's the biggest weak spot in the economy.
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