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Retail sales: a small but hopeful rise

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(Read caption) School uniforms by Izod are displayed at JCPenney in New York last month. The Commerce Department said Tuesday, Aug. 13, 2013, that retail sales increased 0.2 percent in July from June.

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At first glance, July’s retail sales numbers, released Tuesday by the US Commerce Department, aren’t particularly impressive. But the actual breakdown tells a different story.

Retail sales rose a combined 0.2 percent in July, after climbing 0.6 percent in June.  That would seem like a setback, and indeed, analysts expected a bigger gain (about 0.3 percent). But core retail sales, a closely watched measure that excludes autos and gasoline, increased 0.5 percent after going flat in June. The report heartened economists, who take it as a promising sign of accelerating consumer spending.

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“This is a relatively good report,” Chris Christopher, an economist with IHS Global Insight, wrote via e-mailed analysis. “Consumers made a comeback in July. The gains in clothing, sporting, department, general merchandise and restaurants in July after a poor showing in June are pointing to renewed strength on the back-to-school shopping season and consumer spending for the third quarter. In addition, both grocery stores and restaurants posted significant gains.“

One notable drag came from auto sales, which dropped 1 percent in July on the heels of a very strong June. Barclays economist Peter Newland characterized the drop as “partial payback for strong gains in May and June,” rather than a weakening of the industry.

Strong gains in grocery stores, sporting goods, and other "core" categories are seen as a reliable reflection of longer-term spending trends, so many analysts take such gains as a promising sign for further economic growth. Gasoline also fared well, with a 0.9 percent increase.

The biggest losses came in furniture sales, which fell 1.4 percent. Electronics and building materials also slid, by 0.1 percent and 0.4 percent, respectively.