Retail sales swell as shoppers step up spending

Consumers stepped up their purchases in August as retail sales grew at the fastest pace since April, the Commerce Department said Friday.

Retail sales increased 0.6% in August. Excluding booming auto purchases, a volatile category, sales rose 0.3%.

More good news: The growth in sales in July was revised to 0.3% from virtually no change in the government's previous estimate.

In August, sales at furniture, electronics and clothing stores rose, while department store sales declined.

Americans are splurging on cars and SUVs after deferring such purchases during the economic downturn. Auto sales reached an eight-year high of 17.5 million last month, according to an Autodata report last week. But other core measures of consumer discretionary spending generally have been disappointing this year.

After slumping earlier in the year amid harsh winter weather, retail sales rebounded moderately in the spring but did not surge as much as economists expected and were virtually unchanged in July.

Economists expected higher household wealth -- from a stock market rally and rising home prices -- and lower debt to fuel a pick-up in spending this year. But annual wage increases have been stuck at about 2% through most of the five-year-old recovery, and analysts say faster pay increases are needed to spur a significant jump in spending.

Still, the strong report for August and the revisions for the previous month suggest Americans are spending more briskly than previously believed.

Paul Dales, senior U.S. economist at Capital Economics called the new data "quite positive."

"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 into next year too," Dales said.