By Martin Crutsinger ,AP
WASHINGTON — U.S. retail sales edged up in July despite a drop in auto sales. A category of purchases that excludes the most volatile areas rose by the most in seven months, a sign that stronger consumer spending could boost economic growth.
The Commerce Department said Tuesday that retail sales increased 0.2 percent in July from June. Sales had risen 0.6 percent in June from May. The change in both months was driven by autos, which surged 2.9 percent in June but fell 1 percent in July.
“Core” retail sales, which exclude the volatile auto, gas and building supply categories, rose 0.5 percent in July. These sales had risen 0.1 percent in May and 0.2 percent in June. July’s gain was the biggest such advance since a 0.5 percent rise in December.
Retail sales are closely watched because they’re the government’s first report each month on consumer spending, which accounts for 70 percent of U.S. economic activity.
Sales at department stores rose 0.6 percent in July, rebounding from a 1.2 percent drop in June. A broader category of general merchandise, which covers big retailers such as Wal-Mart and Target, rose 0.4 percent after no change in June.
Purchases at gasoline stations rose 0.9 percent, an increase that partly reflected higher pump prices. Excluding gasoline, retail sales would have risen 0.1 percent in July.
Sales at clothing stores rose 0.9 percent and 0.6 percent at grocery stores and restaurants. At furniture stores, sales fell 1.4 percent. Purchases at building supply and appliance stores also weakened.
The U.S. economy grew at lackluster annual rates of 1.1 percent in the January-March quarter and 1.7 percent in the April-June quarter. But many economists think growth will rebound in the second half of the year to an annual rate of roughly 2.5 percent.
Steady job growth will help. In July, the unemployment rate fell to a 4 1/2-year low of 7.4 percent, from 7.6 percent in June, though employers added only a modest 162,000 jobs.
The drop in auto sales in the government’s retail sales report contrasts with reports from automakers. General Motors, Ford, Chrysler, Toyota and Nissan have all reported double-digit sales gains from a year ago. The government’s figures are seasonally adjusted and compare sales with the previous month, not with year-ago levels.
Americans are still being held back by few pay increases at a time of higher taxes and rising gas prices.