Quantitative Easing

US retail sales rise in May in sign world's biggest economy is recovering

PUBLISHED : Friday, 14 June, 2013, 12:00am
UPDATED : Monday, 30 May, 2016, 2:05pm

Retail sales in the United States rose more than expected last month and first-time applications for jobless benefits fell last week, suggesting the economy was squeezing out of a soft patch.

The signs of resilience in the economy, despite belt-tightening in Washington, could heat up the debate on when the Federal Reserve might start scaling back its expansive monetary stimulus.

The data was "strong and confirmed the Fed has the leeway to signal it's ready to pull out", said Robbert Van Batenburg, a director of market strategy at Newedge brokerage.

The commerce department said yesterday retail sales increased 0.6 per cent after edging up 0.1 per cent in April.

Economists had expected retail sales, which account for about 30 per cent of consumer spending, to rise 0.4 per cent. So-called "core sales", which strip out cars, petrol and building materials, and correspond most closely with the consumer spending component of gross domestic product, increased 0.3 per cent after rising 0.2 per cent in April.

The increase offers hope consumer spending may not slow too much in the second quarter, after spending fell in April for the first time in a year.

Consumer spending, which accounts for 70 per cent of US economic activity, grew at its fastest pace in two years in the first quarter, boosted in part by demand for utilities. It is expected to slow this quarter and hold economic growth to below a 2 per cent annual pace.

The economy grew at a 2.4 per cent rate in the first three months of the year.

In a separate report, the labour department said initial claims for state unemployment benefits fell 12,000 to a seasonally adjusted 334,000 last week.

The reports indicated a pickup in economic momentum which could allow the Fed to consider pulling back on monetary stimulus. But with industrial production weakening, economists do not expect changes to the central bank's monthly purchase of US$85 billion in bonds when its policy-setting committee meets for two days from June 18.