Sales at U.S. retailers rose more than forecast in May, and firings waned last week, indicating consumers will help propel the world’s largest economy past a second-quarter slowdown.
Purchases climbed 0.6 percent, the biggest gain in three months, following a 0.1 percent April increase, Commerce Department figures showed today in Washington. The number of claims for jobless benefits dropped by 12,000 to 334,000 in the week ended June 8, the Labor Department reported.
The reports sent U.S. stocks higher, ending a three-day slide. This year’s almost 15 percent gain by the Standard & Poor’s 500 index, along with an improving job market and higher home prices, are shoring up confidence and driving demand at companies from Toyota Motor Corp. to Gap Inc. Rising household purchases will help overcome the effects of government spending cuts that are projected to slow the expansion.
“The consumer seems to be faring very well,” said Brian Jones, senior U.S. economist in New York at Societe Generale, who correctly forecast the gain in sales. “The labor market is getting better. People realize that the employment situation has improved so they feel better and are probably willing to go out and spend money.”
The Standard & Poor’s 500 Index advanced 1.5 percent to 1,636.36 at the close in New York.
The labor market is also showing strength in Australia, according to a report today from the statistics bureau in Sydney. The number of people employed unexpectedly rose by 1,100 in May, and the jobless rate fell to 5.5 percent from a revised 5.6 percent.
The median forecast of 83 economists surveyed by Bloomberg projected retail sales would rise 0.4 percent. Estimates ranged from a 0.1 percent drop to a 0.8 percent advance.
Eight of 13 major retail categories showed gains last month, led by the biggest increase in purchases at auto dealerships in six months. Sales increased 1.8 percent, more than twice the 0.7 percent gain a month earlier.
Cars and light trucks sold at a 15.2 million annualized rate in May, making it the sixth month out of the last seven to exceed the 15-million mark -- a level that previously hadn’t been reached since February 2008.
“The U.S. economy finally seems to be improving,” Jim Lentz, Toyota’s North American chief executive officer, said yesterday in Nagoya City, Japan. The Japanese automaker said this week it will meet a sales goal for its Prius model in the U.S. after saying in April that the world’s biggest carmaker may adjust the target as declining gas prices restrained demand.
In the category that excludes autos, gasoline and building materials, which are the figures used to calculate gross domestic product, today’s Commerce Department report showed sales increased 0.3 percent in May after a revised 0.2 percent gain in the previous month.
San Francisco-based Gap, the largest U.S. specialty apparel retailer, last week reported a 7 percent increase in May sales compared with the same month in 2012, almost double the 3.7 percent gain projected by analysts on average.
The American consumer “is incredibly resilient,” Eric Wiseman, chief executive officer of VF Corp., the world’s largest apparel maker, said in an interview yesterday. “Are there risks that the economy could slow down? Yes. But for now, the consumer seems pretty engaged.”
Household spending will grow at a 1.9 percent annualized rate this quarter after expanding at a 3.4 percent pace in the first three months of the year, the most since the end of 2010, according to the median forecast of 66 economists surveyed by Bloomberg from June 7 to June 12.
Analysts said most of the slowdown in spending will be seen in services, reflecting a drop-off in utility use as temperatures turn more seasonable following colder-than-normal readings in the first quarter. Purchases are projected to climb at an average 2.4 percent annualized rate in the second half of the year.
“Consumer spending has been relatively decent and looks like it’s going to remain on track,” said John Ryding, chief economist at RDQ Economics in New York. The second quarter, should show “better quality” of spending as households divert money from heating bills to other purchases. “Consumers are doing their share.”
The economy will grow at a 1.7 percent pace this quarter after expanding 2.4 percent in the first three months of the year, this month’s Bloomberg survey also showed. The automatic across-the-board federal spending cuts, or sequestration, that began in March will probably have their greatest impact on the expansion this quarter.
Strength in the stock and housing markets is helping to bolster household balance sheets and keep Americans spending even after an increase in the payroll tax took effect in January. The Standard & Poor’s 500 Index has advanced 14.7 percent this year.
Property values rose 10.5 percent in the 12 months through March, the biggest gain in seven years and the 13th consecutive advance in national home prices, according to Irvine, California-based CoreLogic Inc.
Bigger job gains that lead to increased wage growth would help contribute to an even faster pace of consumer purchases. Employers added 175,000 jobs last month, the Labor Department said last week. Job gains averaged 176,250 in the year ended last month.
One concern is that consumer confidence has shown little forward momentum since reaching a five-year high in April.
The Bloomberg Consumer Comfort Index declined to minus 31.3 in the period ended June 9, the lowest level in two months, from minus 29.7 a week earlier. Consumers’ views on their personal finances weakened and their opinion of the buying climate was at its lowest since mid-March.
Lower-income Americans have benefited the least from equity prices and the housing recovery, said David Tehle, chief financial officer at Dollar General Corp., based in Goodlettsville, Tennessee.
The retailer’s customers generally earn $50,000 or less a year, don’t own homes, and don’t have investments or retirement funds that reap the benefits of stock market gains, he said. Some are making less money than they once did.
“I don’t think there is any doubt that the recovery we’re seeing right now is uneven,” Tehle said at a June 12 conference. “As I look at our core customer, the biggest issue they are facing probably is not unemployment, it’s underemployment.”
The jobless rate rose to 7.6 percent in May from 7.5 percent as the number of people entering the workforce swamped the number of available positions, last week’s report from the Labor Department showed.
The so-called underemployment rate, which takes into account people working part-time because they couldn’t find full-time jobs and those saying they were so discouraged about prospects that they’ve stopped looking, was at 13.8 percent last month. It averaged 9.1 percent during the last expansion.