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Retail sales climb, thanks to car buyers

WASHINGTON - Attractive sales incentives at auto dealerships sent retail sales up in July despite lackluster demand at department stores and a number of other retail establishments.

The Commerce Department reported Thursday that retail sales rose by 1.8 percent, the best showing in three months. Almost all of that jump came from auto sales, which soared by 6.7 percent.

That was the biggest one-month increase since October 2001, when automakers had strengthened their incentive programs to keep demand from faltering after the Sept. 11 terrorist attacks.

Excluding autos, retail sales were up 0.3 percent in July, about half the gain economists had been expecting. Still analysts are forecasting a rebound in demand in coming months with consumer spending expected to remain strong, reflecting solid gains in employment.

In another report, inventories held by businesses on shelves and backlots were unchanged in June, marking the first time inventory levels had failed to increase in nine months. That reflected efforts by auto dealers and other businesses to clear out an overhang of unsold inventories.

That effort subtracted significantly from economic growth in the second quarter but set the stage for much stronger growth in coming months. The economy, as measured by the gross domestic product, expanded at an annual rate of 3.4 percent in the second quarter. Many economists predict the GDP will surge at a rate of more than 4 percent this quarter.

In other economic news, the Labor Department said Thursday the number of Americans filing claims for unemployment benefits declined last week by 6,000, the first drop in three weeks. The decrease left claims at 308,000, a level that signals continued strength in the labor market.

The 1.8 percent increase in retail sales last month was the best showing since a 1.8 percent rise in sales in April. Consumer spending accounts for two-thirds of economic activity.

For July, the sales gains outside of autos occurred at electronics and appliance stores, which saw sales rise by 1 percent, and gasoline stations, which posted a gain of 2.4 percent. However, the service station increase reflected in large part the big jump in gasoline pump prices.

[Last modified August 12, 2005, 00:46:18]