Reflecting strong sales growth throughout much of the sector, the Commerce Department released a report on Thursday showing a much bigger than expected increase in U.S. retail sales in the month of May.

The Commerce Department said retail sales jumped by 0.8 percent in May after climbing by an upwardly revised 0.4 percent in April.

Economists had expected retail sales to rise by 0.4 percent compared to the 0.3 percent increase originally reported for the previous month.

The bigger than expected increase in retail sales was partly due to continued growth in sales by motor vehicle and parts dealers, which rose by 0.5 percent in May after edging up by 0.2 percent in April.

Excluding auto sales, retail sales still surged up by 0.9 percent in May following a 0.4 percent increase in April. Ex-auto sales had been expected to climb by 0.5 percent.

The report showed a 2.4 percent spike in sales by building material and supplies dealers as well as a 2.0 percent jump in sales by gas stations amid higher gasoline prices. Sales by food services and drinking places also surged up by 1.3 percent.

Nonetheless, closely watched core retail sales, which exclude automobiles, gasoline, building materials and food services, increased by a solid 0.5 percent in May after climbing by an upwardly revised 0.6 percent in April.

Miscellaneous store retailers, department stores, and clothing and accessories stores all saw significant sales growth during the month.

"U.S. households are back to their free spending ways, with the strength of May's retail sales figures implying that second-quarter real consumption growth (and GDP growth for that matter) will now be more than 4% annualized," said Paul Ashworth, Chief U.S. Economist at Capital Economics.

He added, "With the benefit of the tax cuts, strong employment growth and a slow acceleration in hourly wage growth, consumption growth should remain strong going into the second half of this year."

Compared to the same month a year ago, retail sales were up by 5.9 percent in May versus the 4.8 percent year-over-year increase in April.

by P2PNews Staff Writer

editorial@p2pnews.com

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