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Retail sales up 0.8% in May; weekly jobless claims fall
US retail sales increased more than expected in May as consumers bought motor vehicles and a range of other goods even as they paid more for petrol, the latest indication of an acceleration in economic growth in the second quarter.
Other data on Thursday showed a further tightening in labour market conditions, with first-time applications for unemployment benefits unexpectedly falling last week and the number of Americans on jobless rolls declining to a near 44-1/2-year low.
The reports came a day after the Federal Reserve raised interest rates for a second time this year and offered an upbeat assessment of the economy. The US central bank described economic activity as "rising at a solid rate" and the labour market as continuing to "strengthen". The Fed forecast two more rate hikes in the second half of 2018.
"In short, the Fed was right to upgrade its assessment of economic growth to 'solid' in yesterday's statement," said Paul Ashworth, chief US economist at Capital Economics in Toronto.
The Commerce Department said retail sales jumped 0.8 per cent last month, the biggest advance since November 2017. Data for April was revised up to show sales rising 0.4 per cent instead of the previously reported 0.2 per cent gain.
Economists polled by Reuters had forecast retail sales rising 0.4 per cent in May. Retail sales in May increased 5.9 per cent from a year ago.
Excluding automobiles, petrol, building materials and food services, retail sales rose 0.5 per cent last month after an upwardly revised 0.6 per cent increase in April. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported to have risen 0.5 per cent in April.
The strong retail sales report added to data ranging from the labour market to manufacturing and trade in suggesting the economy was regaining momentum in Q2 after growth slowed at the start of the year amid a sharp step-down in consumer spending.
Growth estimates for the April-June quarter are as high as a 4.6 per cent annualised rate. The economy grew at a 2.2 per cent rate in the first quarter.
The US dollar extended gains versus a basket of currencies after the data while prices for US Treasuries fell. US stock index futures were trading higher.
Retail sales are being underpinned by a robust labour market, which is gradually boosting wage growth.
In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 4,000 to a seasonally adjusted 218,000 for the week ended June 9.
Economists polled by Reuters had forecast claims rising to 224,000 in the latest week. The number of people receiving benefits after an initial week of aid declined 49,000 to 1.70 million in the week ended June 2, the lowest level since December 1973.
The labour market is considered to be close to or at full employment, with the jobless rate at an 18-year low of 3.8 per cent. The unemployment rate has dropped by three-tenths of a percentage point this year. It is near the Fed's forecast of 3.6 per cent by the end of this year.
Lay-offs have remained very low amid signs of growing worker shortages across all sectors of the economy. The were a record 6.7 million job openings in April. The number of unemployed people per vacancy slipped to 0.9 from 1.0 in March, indicating that most people looking for a job are likely to find one. REUTERS