(Adds details, new analyst comments; updates markets)
* Retail sales rise 0.2 percent in June
* Core retail sales increase 0.6 percent, May revised up
* New York state manufacturing at more than four-year high
By Lucia Mutikani
WASHINGTON, July 15 A gauge of U.S. consumer
spending rose solidly in June, in the latest indication that the
economy ended the second quarter on a stronger footing.
That momentum appeared to have carried into the third
quarter, with another report on Tuesday showing factory activity
in New York state expanded sharply in July.
"This is not a fragile economy," said Chris Rupkey, chief
financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
"The consumer continues to play their part in moving the economy
Core sales, which strip out automobiles, gasoline, building
materials and food services, increased 0.6 percent last month
after rising an upwardly revised 0.2 percent in May, the
Commerce Department said.
Core sales, which correspond most closely with the consumer
spending component of gross domestic product, were previously
reported as being flat in May. Economists had expected them to
rise 0.5 percent in June.
The report added to signs of the economy's strengthening
fundamentals, which could buoy optimism the recovery is on a
self-sustaining path, after output contracted sharply in the
Federal Reserve Chair Janet Yellen told lawmakers the
economy continued to improve, but noted that the recovery was
not yet complete because of still-high unemployment.
Yellen, however, cautioned the U.S. central bank could raise
interest rates sooner and more rapidly than currently envisioned
if the labor market continued to improve faster than anticipated
Labor market conditions are firming, with the unemployment
rate falling to a near six year-low of 6.1 percent in June and
job growth exceeding 200,000 for a fifth straight month.
Prices for U.S. Treasury debt fell on the economic data and
Yellen's interest rate comments, while the dollar gained against
a basket of currencies. U.S. stocks traded lower.
June's gains and May's upward revision to core retail sales
suggested a pickup in consumer spending in the second quarter
after growing at its slowest pace in more than four years in the
first quarter because of weak healthcare consumption.
Forecasting firm Macroeconomic Advisers raised its
second-quarter GDP growth forecast by three-tenths of a
percentage point to a 3.0 percent annual pace. Goldman Sachs
upped its estimate for the quarter by two-tenths to a 3.4
A surprise drop in receipts for automobiles, however, held
overall retail sales to a 0.2 percent increase in June after
advancing 0.5 percent the prior month.
"Consumers will likely gain more confidence to spend as the
job market improves and summer travel season hits full swing,"
said Randy Hopper, credit cards vice president at Navy Federal
Credit Union in Vienna, Virginia.
"We are optimistic that the second half of the year will
deliver stronger sales growth."
From employment to manufacturing, the economy appears to be
firing on nearly all cylinders, with even housing regaining its
footing after slumping in late 2013 following a run-up in
mortgage rates. Growth estimates for the second quarter top a
3.0 percent annual rate.
In another report, the New York Fed said its Empire State
general business conditions index jumped to 25.60 this month,
the highest since April 2010, from 19.28 in June.
New orders edged up, while factory employment and shipments
surged. There were also signs of inflation pressures, with
measures of both prices received and paid by manufacturers
rising in July.
Overall retail sales in June were restrained by a 0.3
percent fall in receipts at auto dealerships. The decline is
surprising given automakers reported a surge in motor vehicle
sales in June.
Auto sales had increased 0.8 percent in May. Excluding
autos, sales grew 0.4 percent after rising by the same margin in
May. There were increases in sales at non-store retailers, which
include online sales, as sales at clothing retailers.
Receipts at sporting goods shops rose as did those at
electronics and appliances stores. But sales at building
materials and garden equipment suppliers fell 1.0 percent.
(Reporting by Lucia Mutikani, additional reporting by Rodrigo
Campos in New York; Editing by Meredith Mazzilli)