U.S. retail sales surged in May as households boosted purchases of automobiles and a range of other goods even as they paid a bit more for gasoline, the latest sign economic growth is finally gathering steam.
While other data on Thursday showed a slight increase in new applications for unemployment benefits, the number remained in territory associated with a tightening labor market. The signs of a firming economy could likely prompt the Federal Reserve to raise interest rates in September.
“Today’s data, including the trend-like jobless claims number, keep September firmly in place as a credible option for the Fed,” said Anthony Karydakis, chief economic strategist at Miller Tabak in New York.
Retail sales increased 1.2 percent last month after an upwardly revised 0.2 percent gain in April, the Commerce Department said. April sales were previously reported to have been unchanged. March sales were also revised to show them rising 1.5 percent instead of 1.1 percent.
The dollar rallied against a basket of currencies on the retail sales data. Prices for U.S. government debt rose as lower European borrowing costs renewed appetite for Treasuries. U.S. stocks were trading higher.
The U.S. central bank has kept its short-term interest rate near zero since December 2008. Solid retail sales data added to robust job growth in May and stabilizing manufacturing activity in suggesting the economy was finding momentum after getting off to a slow start in the second quarter.
Retail sales excluding automobiles, gasoline, building materials and food services increased 0.7 percent last month after an upwardly revised 0.1 percent rise in April.
These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
Economists had forecast core retail sales rising 0.5 percent after they were previously reported to have been flat in April.
March core retail sales were also revised up to show them increasing 0.9 percent instead of 0.5 percent.