US retail sales rise in July, easing recession fears

Man fills up car
Image caption Spending on cars and fuel rose in July

US retail sales rose in July by the largest amount in four months, Commerce Department figures show, tempering fears that the US may be slipping back into recession.

Sales rose 0.5% in July, the best since March's 0.8% increase. Figures for June were revised up to show a 0.3% rise.

However, a separate survey suggested US consumer confidence has fallen sharply.

Consumer spending is watched closely in the US as it accounts for two-thirds of the country's economic activity.

Consumers spent more on furniture, cars and petrol in July, in part reflecting the higher cost of fuel.

US consumers have been more careful about their spending in recent months, in part due to high unemployment and rising energy and food prices.

The data suggests the US economy is not as weak as some had previously believed.

"When you look at the overall data that's been coming out, it's really a mixed bag, and this shows that the economy is not falling off its wheels," said Rudy Narvas at Societe Generale in New York.

This week, the Federal Reserve said it expects to keep interest rates unchanged until at least the middle of 2013 and gave a gloomy assessment of the US economy.

'Big drop'

The Thomson Reuters/University of Michigan survey's preliminary finding for the start of August showed consumer sentiment at 54.9, the lowest level since May 1980.

However, the survey took place during the tense stand-off between the president and Congress over the lifting of the debt ceiling, but before ratings agency Standard and Poor's downgraded America's credit rating.

Two-thirds of consumers polled in the survey said they felt the economy had got worse recently.

"It's a big drop, [but] it's to be expected," said Kurt Karl at Swiss Re in New York.

"The confidence was guaranteed to go down given all the upsets in the [stock] market. Hopefully this won't be the precursor of consumers' action in August."

Related Internet links

The BBC is not responsible for the content of external Internet sites