Watch CBSN Live

Rebound in retail sales point to steady growth

WASHINGTON - Americans bought more cars, restaurant meals and building supplies in July, as the spending points to steady economic growth anchored by the improving job market.

The Commerce Department said Thursday that retail sales climbed 0.6 percent last month after a flat reading in June.

July's increase suggests that the combination of solid hiring and cheaper gasoline is contributing to rising consumer confidence and spending after a muted start to 2015. Greater retail sales could help boost overall economic growth, since consumer spending accounts for the majority of economic activity.

"This report looks solid after a run of disappointing numbers," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Purchases at auto dealers increased 1.4 percent last month, while restaurants and building materials stores both recorded a 0.7 percent gain. Shopping also improved at furniture stores, sporting goods retailers and clothiers last month.

Even gasoline station sales increased in July, although cheaper energy prices at the pump have fueled a 15.2 percent drop into purchases over the past year.

Not all sectors improved last month. Sales waned at electronics and department stores, while spending at grocers was flat.

In the past 12 months, retail sales have risen 2.4 percent. That increase slightly exceeds average hourly wage growth of 2.1 percent, a sign that consumers are beginning to spend their additional earnings after a prolonged period of caution during the six-year recovery from the Great Recession.

Retail spending has improved as employers have added a seemingly robust 2.9 million jobs over the past year. The hiring has driven the unemployment rate down to 5.3 percent from 6.2 percent during that period.

Consumers have also benefited from cheaper gasoline. Prices at the pump are averaging $2.59 a gallon nationwide, a 25 percent drop over the past year, according to AAA.

But the drop in gas prices also weighed on retail sales, which the government measures in dollars. When prices drop and the dollar becomes cheaper relative to other currencies, consumers might be purchasing the same amount of items even if they're spending less money in total.

Economists watch the retail sales report closely because it provides the first indication each month of the willingness of Americans to spend. Con