The American consumer, missing in action for much of 2015, showed up in May.
Retail sales increased 1.2 percent last month, reflecting broad-based gains from car dealers to clothing outlets to department stores, after a 0.2 percent advance in April, according to data Thursday from the Commerce Department. A report on jobless claims pointed to continued strength in the labor market.
Receipts climbed in 11 of 13 major retail categories, the most this year and a sign that employment and income gains are allowing households to buy more than just automobiles. A sustained pickup in purchases -- accompanied by faster wage growth -- would burnish the outlook for growth this year.
“The consumer took a month off and came back and spent in style,” said Ward McCarthy, chief financial economist at Jefferies LLC in New York, who correctly forecast the May increase. “Consumers’ behavior has been inconsistent, but the trend has been for gradual acceleration of spending.”
Sales at auto dealers, clothing and building-material stores were among the biggest gainers last month, according to the Commerce Department’s report.
Economists at Credit Suisse and Barclays Plc raised their tracking estimates for second-quarter economic growth after the sales figures. Business inventories, which climbed 0.4 percent in April, according to a Commerce Department report Thursday, may help provide an additional boost to gross domestic product.
Stocks advanced as the data added to optimism on the strength of the economy. The Standard & Poor’s 500 Index climbed 0.2 percent to 2,108.86 at the close in New York.
Since the first week of March, applications for unemployment benefits have remained below 300,000, a level that economists say is consistent with improving employment conditions. Jobless claims rose by 2,000 to 279,000 in the period ended June 6, according to the Labor Department. Employers are retaining workers in anticipation of a pickup in demand after a slow start to the year.
Stronger job and wage gains such as those seen in May will be needed to help ensure Americans continue to boost spending. Payrolls climbed by 280,000 last month, the biggest gain this year, while hourly pay rose 2.3 percent from the year before, the most since August 2013.
“The labor market is reasonably good,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, who projected claims of 280,000. “Consumer spending is getting support from the labor market clearly and from some income growth.”
Household wealth climbed $1.63 trillion in the first quarter, or 2 percent from the previous three months, the Federal Reserve said Thursday in its financial accounts report. Gains in stock portfolios and higher property values helped fortify balance sheets.
The gain in retail sales matched the median forecast of 85 economists in a Bloomberg survey. April retail sales were previously reported as little changed. March data were revised up to show an increase of 1.5 percent from a previously reported 1.1 percent advance.
Purchases climbed 2 percent at automobile dealers last month after rising 0.7 percent in April. Industry data from Ward’s Automotive Group issued earlier this month showed cars and light trucks sold at a 17.7 million annualized rate in May, the strongest pace since July 2005.
Memorial Day promotions drew Americans to dealerships, while an improved job market also had consumers heading to showrooms and paying higher prices by taking out longer loans. General Motors Co. and Fiat Chrysler reported bigger sales increases than analysts had anticipated.
Retail sales minus autos increased 1 percent, according to the Commerce Department, after a 0.1 percent gain in April.
The figures used to calculate GDP, which exclude categories such as food services, auto dealers, home-improvement stores and service stations, increased 0.7 percent in May after rising 0.1 percent the month before. The reading for March was revised up to show a 0.9 percent gain compared with a previously reported 0.5 percent advance, which should boost first-quarter consumer spending when the figures are updated later this month.
Harsh winter weather, delays related to a labor dispute at West Coast ports and a stronger dollar caused the economy to contract at a 0.7 percent annualized rate from January through March. Household consumption climbed at a 1.8 percent pace, less than half the 4.4 percent clocked in the previous three months.
Economists surveyed by Bloomberg last month projected consumer spending to accelerate to a 3.2 percent pace in the second quarter.
The retail report showed sales of furniture climbed 0.8 percent after a 1.3 percent jump a month earlier. Receipts at building-materials outlets advanced 2.1 percent, while purchases at apparel merchants were up 1.5 percent, the most since November.
“While we’re encouraged by strong Memorial Day sales reports from our customers, inconsistent and sluggish retail conditions on a day-in and day-out basis had caused demand for our products to be relatively flat throughout the first quarter and during the first four weeks of the current quarter,” Paul Toms, chief executive officer at Hooker Furniture Corp., said in a June 4 earnings call. “Longer term, we’ll remain optimistic.”
Higher fuel prices boosted receipts at service stations in May by the most since February 2013, the Commerce Department’s report showed. The average cost of a gallon of regular gasoline was $2.76 on June 10, compared to $3.64 percent a year ago, according to U.S. motoring group AAA. It fell as low as $2.03 in January.
While the retail sales figures showed households are looking beyond rising fuel costs, the pickup in pump prices is taking a toll on consumer sentiment. The Bloomberg Consumer Comfort Index decreased for a record ninth straight week, reaching the lowest level since November. The gauge has fallen about 8 points since reaching an almost eight-year high in mid-April.