Retail sales rise more than expected

updated 2:29 p.m. ET July 14, 2009

WASHINGTON - Retail sales advanced in June by the largest amount in five months, led by a surge in gasoline prices and a slight rebound in the battered auto sector.

The Commerce Department said Tuesday that retail sales rose 0.6 percent last month, better than the 0.4 percent gain that economists had expected. It marked the second consecutive increase and boosted hopes that the economy may be on the verge of a rebound.

While much of the strength came from a price-driven surge at gasoline stations, there was also strength in a number of other areas, including the best showing at auto dealerships since January.

The hope is that the battered consumer, bolstered by tax cuts including in the $787 billion economic stimulus bill, will resume spending in coming months and this will help end a painful recession that is already the longest in post World War II history.

In June, sales of autos and auto parts jumped by 2.3 percent, the best showing since January. However, even with the gain, auto sales are 14.5 percent below the level of a year ago, underscoring the troubles in the industry.

Excluding autos, retail sales rose by 0.3 percent in June, lower than the 0.5 percent rise that economists had expected.

Much of the strength outside of autos reflected the big jump in gasoline prices during the month, a rise that pushed sales at gasoline stations up by 5 percent, after a similarly big jump in May. Excluding gasoline, retail sales would have risen by 0.3 percent last month, just half the overall gain.

Sales also showed strength and electronics and appliance stores and at sporting goods stores.

Sales at general merchandise stores, the category that includes nationwide department store chains and giant retail chains such as Wal-Mart Stores Inc., fell by 0.4 percent following an even bigger 1.7 percent decline in May. Sales at specialty clothing stores were flat last month.

This dismal showing reflected a report last week showing lackluster chain store sales. Consumers appeared to be shopping for necessities and seeking discounts, buoying discounters but punishing brands like Abercrombie & Fitch. That chain's same-store sales fell 32 percent in June, more than expected. American Eagle Outfitters Inc. reported a drop of 11 percent.

Many economists, however, believe that the economy is in the process of stabilizing after a steep nosedive at the end of last year and first three months of this year. Many are forecasting that the overall economy, as measured by the gross domestic product, will begin growing again this July-September quarter.

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