US retail sales rise on swelling petrol prices - Producer price index jumps 1.8 per cent in June

US retail sales rise on swelling petrol prices - Producer price index jumps 1.8 per cent in June
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: July 14 2009 14:43 | Last updated: July 14 2009 14:49
http://www.ft.com/cms/s/0/4bc0e6c6-700f-11de-b835-00144feabdc0.html


US retail sales jumped last month as consumers spent more on petrol and cars thanks to rising oil prices and aggressive incentives by auto dealers.

The swelling cost of energy is also inflating wholesale prices. A separate report from the Labor Department showed that the producer price index jumped by 1.8 per cent in June, the sharpest monthly increase since November 2007.

Sales rose by 0.6 in June against the previous month and were off by 9 per cent from a year ago, Commerce Department figures showed on Tuesday. The results exceeded analysts’ expectations, but hopes of a consumer revival were dimmed by the fact that most of the increase was due to petrol sales, while other industries continued to struggle.

Excluding sales of cars and parts, which are considered volatile, retail sales rose by a modest 0.3 per cent in June. Petrol stations saw sales rise by 5 per cent during the month and sales at car dealerships climbed by 2.3 per cent.

Restaurants, department stores and home furnishing shops all saw sales dip last month, buttressing evidence from companies that the US consumer remains under severe pressure from falling home prices and rising unemployment.

Economists are waiting to see if government stimulus measures succeed in kick-starting consumer spending. However, rising energy prices raise fears that already depleted household wealth could be further diminished.

“It is clear that this fiscal boost is mostly being used to help fill the hole left by a decimated labour market and to help households whittle down debt burdens,” said Joshua Shapiro, chief US economist at MFR.

Rising prices could put added pressure on consumers and companies as they struggle to recover from the recession. The 1.8 per cent increase in wholesale prices was double economists’ expectations and followed a revised increase of 0.2 per cent in May. Producer prices were off by 4.6 per cent from a year ago.

Energy prices soared by 6.6 per cent in June and food prices climbed by 1.1 per cent. Core producer prices, excluding food and energy, rose by 0.5 per cent, as car and truck prices also saw an increase.

“There is evidence that price pressures are beginning to pick up in manufacturing—especially in input prices and energy,” note John Ryding and Conrad DeQuadros, economists at RDQ Economics. “Despite one of the deepest recessions in global manufacturing, we are starting to see price increases at the wholesale level.”