By  on July 15, 2005

WASHINGTON — Retail sales strengthened in June, although economists said the growth may not be sustainable because consumers have relied too much on credit for their purchases.

Sales at apparel and accessories stores rose 1 percent to $16.78 billion in June, compared with May, according to seasonally adjusted figures released Thursday by the Commerce Department. Sales were up 7.6 percent versus a year ago.

At general merchandise stores, sales increased 1.2 percent to $44.6 billion and were 8.1 percent ahead of last year. Within this category, department stores sales grew 1.3 percent to $18.15 billion and were 2.2 percent above June 2004 results.

Spending was more robust in the broader economy, where sales advanced 1.7 percent to $350.78 billion, a 9.6 increase percent from a year ago.

Charles McMillion, president and chief economist at MBG Information Services, noted that the 1.7 percent boost in overall sales for the month was coupled with just 0.2 percent growth in weekly wages.

"Basically, consumers are spending more than they're earning and they're spending down savings, which were already very small," McMillion said. "The good news is the second quarter will probably come in quite strong, a bit stronger than most people expected."

He predicted the second-quarter gross domestic product increase would be close to the 3.8 percent first-quarter rise.

Retail sales gains also propelled the second-quarter optimism of Standard & Poor's chief economist, David Wyss, who is looking for GDP growth of 3.3 percent.

"The second quarter's looking pretty darn strong now," Wyss said. "People were generally back shopping again in June."

He was also cautious, though.

"[Consumers] are borrowing every dime they can find and maybe a little bit more," he said. "We can't stay like this. We can't continue to spend beyond our means."

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