U.S. Retail Sales Climb 0.5% In May, More Than Expected

(RTTNews) - Retail sales in the U.S. increased by more than expected in the month of May, according to a report released by the Commerce Department on Tuesday.

The Commerce Department said retail sales climbed by 0.5 percent in May after surging up by 1.3 percent in April. Economists had expected sales to rise by 0.3 percent.

The bigger than expected increase in retail sales was partly due to continued growth in auto sales, which advanced by 0.5 percent in May after soaring by 3.1 percent in April.

Excluding the increase in auto sales, retail sales still rose by 0.4 percent in May following a 0.8 percent increase in the previous month. The ex-auto sales growth matched economist estimates.

Gas station sales showed another substantial increase amid higher prices, spiking by 2.1 percent in May after shooting up by 2.5 percent in April.

The report also showed notable sales growth at sporting goods, hobby, book and music stores and non-store retailers.

On the other hand, the report said sales by building materials and garden equipment and supplies dealers slumped by 1.8 percent. Sales by miscellaneous store retailers also fell by 1.2 percent.

Core retail sales, which exclude sales of automobiles, gasoline, building materials and food service, rose by 0.4 percent in May after climbing by an upwardly revised 1.0 percent in April.

James Knightley, Senior Economist at ING, said the retail sales data combined with strong consumer confidence readings indicates that the household sector is in decent shape and not unduly concerned by the disappointing May jobs report.

"Indeed, with jobless claims at low levels and job openings at cycle highs we suspect that the payrolls numbers will improve again next month," Knightley said.

He added, "This won't be enough to convince the Federal Reserve to hike rates tomorrow or in July, but we still feel there is a strong chance of a September hike."

The Commerce Department said total retail sales in May were up by 2.5 percent compared to the same month a year ago, reflecting a deceleration from the 3.0 percent jump in April.