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US retail sales quicken as price pressures stay tame

Jaime Henry-White | AP

A gauge of U.S. consumer spending rose in July at its fastest pace in seven months, a sign of quicker economic growth that could strengthen the case for the U.S. Federal Reserve winding down a major economic stimulus program.

Meanwhile, a separate report showed that U.S. import prices rose less than expected in July as an increase in the cost of petroleum was offset by the biggest drop in the price of non-petroleum goods in nearly 4-1/2 years, pointing to benign inflation pressures.

Retail sales outside of cars, gasoline and building materials rose 0.5 percent last month, the Commerce Department said on Tuesday.

That reading is a key component of the department's measure of consumer spending, which is the biggest driver of the economy, as it accounts for about 70 percent of national output.

July's gain was the biggest since December, and suggests the economy could be regaining steam after tax hikes and federal budget cuts dragged on growth in the first half of the year.

Economists polled by Reuters had expected the core measure of retail sales to increase 0.3 percent.

Fed Chairman Ben Bernanke said last month that the U.S. central bank could begin reducing monthly bond purchases, which are aimed to lower borrowing costs and boost employment, by the end of the year.

In July, sales jumped 0.6 percent at U.S. department stores, the biggest gain since March 2012. Sales also posted strong gains at health and personal goods stores.

Sales of motor vehicles fell 1 percent during the month.

Overall retail sales rose 0.2 percent during the month, just below analysts' expectations. Overall sales were helped by a strong gain in gasoline receipts.

Prices stays tame

In another report, import prices gained 0.2 percent last month, the Labor Department said on Tuesday, snapping four staight months of declines. June's data was revised to show a 0.4 percent drop instead of the previously reported 0.2 percent fall.

Economists polled by Reuters had expected prices to rebound 0.6 percent last month.

In the 12 months to July, import prices were up 1.0 percent.

Stripping out petroleum, import prices fell 0.5 percent, the largest fall since March 2009. That likely reflected a strengthening in the dollar in recent months.

The tame inflation environment will be scrutinized by the Federal Reserve as it considers trimming its massive monthly bond purchases later this year.

Most economists anticipate the U.S. central bank, which has said it expects inflation to start trending up, will make an announcement in September on the future of the $85 billion in bonds it is purchasing each month to keep borrowing costs low.

Last month, imported petroleum prices increased 3.2 percent after faling 0.8 percent in June. Imported food prices edged up 0.2 percent after declining 1.0 percent the prior month.

Elsewhere, imported capital goods prices barely rose after dipping in June. Prices for automobiles fell 0.5 percent, the largest decline since December 1992.

The Labor Department report also showed export prices slipped 0.1 percent last month, falling for a fifth consecutive month. Export prices had dipped 0.1 percent in June.


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