16 July 2009

Auto, gasoline sales jump in June

While positive signs appeared in June with auto and gasoline sales jumping, the recession is continuing its strong hold on the economy as consumer discretionary spending remained down.

The hike in auto and gasoline sales was the bright star in an otherwise lackluster June for U.S. retailers. In addition, an inflation gauge jumped by twice as much as expected, suggesting the long-awaited economic recovery will be sluggish.

Commerce Department data showed sales at U.S. retailers rose 0.6% from a month earlier, ahead of economists’ expectations for a 0.4% advance.

“We fell off a cliff at the end of last year, and we’re at a relatively flat point right now,” said Rebecca Blank, undersecretary for economic affairs at the Commerce Department. “The movement is in the right direction, but it’s not strong enough yet to call this clear signs of the recovery.”

A separate report from the Labor Department showed producer prices jumped 1.8% last month, far outstripping forecasts for a 0.9% gain.

Another set of data showed business inventories fell for a ninth consecutive month, pressured by a steep drop in stocks of motor vehicles and parts.

Excluding autos and parts, which recorded a 2.3% gain, retail sales were up 0.3%, short of analysts’ expectations for a 0.5% advance.

Gasoline stations showed strong gains, helped by rising prices. The average price per gallon of gas rose to $2.68 in June from $2.32 in May, according to government data.

If you take away auto and gasoline sales, retail sales were down 0.2%, the fourth consecutive monthly decline.

U.S. business inventories fell 1% in May, according to Commerce Department data. That was steeper than the 0.8% decline economists had predicted. The inventory of motor vehicles and parts dropped 4.2% in May, the biggest decrease since a 5.4% drop in July 2005.

For related information, go to www.isa.org/productivity.