US sales hiccup but recovery on track

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US retail sales rose less than expected in May and first-time applications for unemployment benefits increased last week, but that will probably do little to change views that the economy is regaining momentum.

The Commerce Department said yesterday retail sales gained 0.3 per cent last month. While that was below economists’ expectations for a 0.6 per cent rise, April’s retail sales were revised to show a 0.5 per cent increase.

Retail sales, which account for a third of consumer spending, had previously been reported as having gained 0.1 per cent in April.

In a separate report, the Labor Department said initial claims for state unemployment benefits climbed 4,000 to a seasonally adjusted 317,000 for the week ended June 7.

With job growth rising solidly in May and manufacturing and services industries expanding strongly, the retail and jobless claims reports probably will not cause too much anxiety.

The economy added 217,000 jobs in May, the fourth straight month of job gains above 200,000. It has recouped all the 8.7 million jobs lost during the recession. The unemployment rate held steady at a five-and-a-half-year low of 6.3 per cent.

Economic growth in the second quarter is expected to top a 3.0 per cent annual pace after contracting at a 1.0 per cent rate in the January-March period.