U.S. retail sales jump in August

U.S. retail sales increased 2.7 per cent to $351.4 billion US in August, the Commerce Department said Tuesday.

Economists had been expecting a more modest rise of 1.9 per cent, after retail sales had slipped 0.2 per cent in July.

The U.S. Cash for Clunkers program, where consumers were given rebates of up to $4,500 US to trade in older vehicles and purchase new, more fuel-efficient cars, drove most of the gains.

Auto sales soared 10.6 per cent during the month, the most in almost eight years. But with sales of vehicles and parts excluded, retail sales still increased 1.1 per cent on a monthly basis.

While economists had expected increases in auto sales and gas station sales, due to higher prices at the pump, sales also rose at electronics, appliance, department and sporting goods stores.

The overall sales figure is still 5.3 per cent below its level in August 2008.

Consumer spending is closely watched because it accounts for about 70 per cent of U.S. economic activity.

Many economists expect the economy to grow by as much as three to four per cent in the July-September quarter, largely due to the Cash for Clunkers program. However, there are also concerns that the recovery could weaken next year as government stimulus efforts end.

In a separate report, the U.S. Labour Department said wholesale prices rose 1.7 per cent in August, more than double the 0.8 per cent increase economists expected. That followed a 0.9 per cent decline in July. Energy prices were a key factor in both months.

Excluding volatile energy and food costs, core inflation as measured by the Producer Price Index increased by 0.2 per cent, double the 0.1 per cent economists had forecast.