May Retail Sales Beat Expectations; Point to Strong Demand

U.S. retail sales rose more than expected in May as Americans bought automobiles and a range of other goods, suggesting economic growth was gaining steam despite a sharp slowdown in job creation.

The Commerce Department said on Tuesday retail sales increased 0.5 percent last month after surging by an unrevised 1.3 percent in April. It was the second straight month of gains and lifted sales 2.5 percent from a year ago.

Excluding automobiles, gasoline, building materials and food services, retail sales rose a solid 0.4 percent last month after an upwardly revised 1.0 percent increase in April.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported to have risen 0.9 percent in April. Economists polled by Reuters had forecast both overall retail and core sales gaining 0.3 percent last month.

The fairly strong May retail sales report could see economists raising their second-quarter GDP growth estimates, which are currently around a 2.5 percent annualized rate. The economy grew at a 0.8 percent rate in the first quarter.

Tepid employment gains in May stirred concerns about the health of the economy. But so far, data on first-time applications for unemployment benefits suggests labor market strength remains intact.

In May, auto sales rose 0.5 percent after racing 3.1 percent in April. Receipts at service stations increased 2.1 percent, reflecting recent increases in gasoline prices.

Sales at clothing stores increased 0.8 percent, the largest gain since November. Online retail sales shot up 1.3 percent. Receipts at sporting goods and hobby stores jumped 1.3 percent last month. Restaurants and bars sales climbed 0.8 percent.

Sales at electronics and appliance outlets gained 0.3 percent. But sales at building materials and garden equipment stores fell 1.8 percent after declining 2.0 percent in April. Furniture store sales dipped 0.1 percent.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)