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The Honolulu Advertiser
Posted on: Saturday, August 12, 2006

Shoppers hit stores in July; sales up 1.4%

By Jeannine Aversa
Associated Press

WASHINGTON — Shoppers got back in the buying mood in July, propelling sales at the nation's retailers up by 1.4 percent, the best in six months.

Economists closely watch consumer behavior because their spending accounts for roughly two-thirds of all economic activity.

The snapback reported yesterday by the Commerce Department came after shoppers hunkered down in June, depressing retail sales by 0.4 percent, according to revised figures. June's sales turned out to be even weaker than the 0.1 percent dip reported a month ago.

The showing on retail sales for July was stronger than economists were expecting. They had forecast a 0.8 percent gain.

"Consumers appear to be hanging tough and are doing their part to ensure that the economic expansion remains intact," said Mark Zandi, chief economist at Moody's Economy.com.

In a separate report from the department, stockpiles of unsold goods grew by 0.8 percent in June as businesses' sales inched up just 0.2 percent. June was not only a weak month for retailers' sales, but also for manufacturers' sales, the report said. The increase in inventories in June was larger than the 0.5 percent rise economists were anticipating.

On Wall Street, the buoyant retail sales figures didn't cheer investors. The Dow Jones industrials dropped 36.34 points to close at 11,088.03.

With shoppers regaining their appetite to spend, they snapped up a variety of goods. Sales rose at stores selling electronics and appliances, building and garden supplies, health and beauty goods, and furniture. Sales also went up at bars and restaurants. Auto dealerships, where sales have flagged in recent months, also saw an improvement as incentives and promotions helped lure buyers.

There were weak spots. Sales at sporting goods, hobby, book, music and department stores slipped.

The 1.4 percent increase for overall retail sales in July was the most since January, when sales jumped by 3 percent.

Excluding sales of automobiles, which can swing widely from month to month, sales at all other merchants rose by a strong 1 percent — after edging up 0.1 percent in June.

Last month's increase in this category excluding autos also was the most since January and exceeded economists' expectations for a 0.5 percent gain.

Sales at gasoline stations also rose strongly in July, reflecting the high prices at the pump. However, even when these sales are taken out of the total, all other merchants' sales rose by 1.3 percent — the biggest increase since January.

Shoppers were out spending in July despite high energy prices, which have strained some families' budgets.

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