August retail sales rise 0.4%, best in five months

Washington â€”  Retail sales showed decent growth in August, economic data indicated Tuesday, easing fears that the U.S. economy would stall out in coming months.

Retail sales rose 0.4% last month, the Commerce Department said. It marked the second straight increase and was the largest gain since March.

The Commerce Department reported separately that business inventories rose 1% during July, the seventh consecutive monthly increase and the largest in two years.

Retail inventories, the only new information in that report, rose 0.7% in July, led by a sharp 2.5% increase in the retail auto sector.

The retail-sales picture suggests that consumer spending will continue at a modest pace in the third quarter.

Consumer spending rose at a 2% annual pace in the second quarter, and economists expect spending to roughly match that pace in the current quarter.

Economists say consumers are still spending conservatively, hunting for bargains outside of basic necessities.

“We’ve been getting consistent, moderate growth in retail sales — it is moderate, but it is growth. It is not contraction,� said Robert Brusca, chief economist at Fact & Opinion Economics.

“All these people are worried about a double dip, but that is not what is going on,� he said, referring to the potential for the U.S. economy to slip back into recession.

The good news in the report is that sales were concentrated in the non-durable sector, suggesting a pickup in demand for services. This is where the jobs are going to have to come from in order to lower the unemployment rate, Brusca said.