US Consumers on a Spending Spree

by Jordan Yerman | June 13, 2007 at 11:41 am

294 views | 0 Recommendations | 0 comments

Research shows an uptick in consumer spending, even in the face of soaring energy costs. What's unclear from this article, though, is how much of this spending is credit-card-based, and not anchored on money actually in the bank.

US consumers have surprised analysts, as official figures revealed that retail sales grew 1.4% in May.

Observers said that the increase, the highest in 16 months, suggested that high petrol prices may not be biting as hard as had been feared.

The data, which also comes amid slumping house prices, buoyed market investors, with Wall Street shares offsetting some of Tuesday's losses.

Sales in April had fallen 0.1%, revised Commerce department data said.

Petrol price effect?

"Is the consumer hurting because gasoline prices have soared?" asked Joel Naroff, of Naroff Economic Advisors.

"It surely doesn't look that way. Households spent money as if it was going out of style in May as retail sales skyrocketed."

The growth was well above the 0.6% which analysts had predicted.

And when vehicle sales were stripped out, retail sales rose 1.3%, again well ahead of analysts' estimates.

Observers say that the data may add credence to Federal Reserve claims that the US economy will pick up in the second half of the year.