US retail sales driven by car buying and health spending

Ford cars Image copyright Getty Images

US retail sales rose by 0.6% in August, compared with the previous month, driven by car purchases, the US Commerce Department said.

On a yearly basis, they rose by 5%.

Increases in spending came from car sales, up 9.5% from August 2013, and healthcare stores, up 8.1% from last year.

Retail sales account for 70% of the US economy and analysts said the figures pointed to stronger overall economic growth.

"With further jobs gains, rises in income growth and a loosening in credit conditions in the pipeline, consumption growth should strengthen in the fourth quarter and in to next year too, " said Paul Dales, US economist at Capital Economics.

July's figure was revised upwards to a 0.3% rise.

Interest rates

A separate consumer survey, the University of Michigan consumer sentiment index, showed more optimism, with the index rising to 84.6 in September, from 82.5 in August.

The general pick up in the US economy has prompted discussion as to when the Federal Reserve might begin to start raising interest rates. The US central bank is next scheduled to meet 16-17 September.

Chris Williamson, economist at Markit, said the retail sales figures "add to the likelihood of the first rise in interest rates occurring earlier than mid-2015".

"Both the official and survey data therefore point to ongoing strong momentum of the US economy in the third quarter, suggesting that the recent slowing in non-farm payroll growth seen in August may prove temporary and that policy makers will be encouraged that further strong job creation will be sustained in coming months," he added.

The US economy added just 142,000 jobs in August, far fewer than analysts' had been expecting.

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