U.S. retail sales rise a better-than-expected 0.4% in August

Washington, D.C. The Commerce Department reported Tuesday that retail sales rose 0.4% in the month of August, representing the second straight increase and the largest gain since March. Core retail sales -- without autos, fuel and building materials -- rose 0.6% in August, also the biggest increase since March.

The August retail report eased fears that the country was entering into a double-dip recession and suggests that consumer spending will continue at a modest pace in the third quarter.

In a separate report, the department said inventories held by businesses jumped in July by the largest amount in two years while sales rebounded after two months of declines.

Consumer spending rose at a 2.0% annual pace in the second quarter, and economists expect spending to roughly match that pace in the current quarter. August sales by category, which were likely helped by back-to-school shopping, included a rise in apparel sales of 1.2%, the most since March.

Sales at general merchandise stores rose 0.4%, including a 0.4% gain at department stores. Sales at food stores increased 1.3%, the government reported. Sales at electronics and appliances stores fell 1.1%. Sales at furniture stores fell 0.5%. Sales at building-supply stores were flat. Sales at stores catering to leisure-time activities, such as reading and music, rose 0.9%. Sales at health- and personal-care stores increased 0.6%. Sales at restaurants and bars edged up 0.1%.

“Most Americans are in a much better financial position than a year ago, but they are still spending cautiously, looking for bargains and comparing prices before buying,” said Matthew Shay, president and CEO of the National Retail Federation, about the latest findings. “While the underlying trends remain positive, shoppers are still focused on getting their finances in order,” added NRF chief economist Jack Kleinhenz. “The challenge for retailers is to convince consumers that the recession is over and to buy accordingly.”