Retail Sales Up for First Time in Three Months
But with a rise in the number of people continuing to receive jobless aid and companies holding off on hiring, analysts warn an economic recovery is still far off.
The Labor Department said Thursday that initial claims for unemployment benefits fell last week by 24,000 to a seasonally adjusted 601,000. That’s below analysts’ estimates of 615,000, reported the Associated Press.
However, the number of people claiming benefits for more than a week rose by 59,000 to more than 6.8 million, the highest on records dating to 1967. The Labor Department also revised last week’s data on continuing claims, replacing what had been a drop of 15,000 with an increase of 6,000.
The Commerce Department said Thursday total retail sales rose 0.5 percent in May, the first advance in three months, lifted by strong gasoline and building material receipts. Consumers also spent more on food and clothing. Sales fell 0.2 percent in April.
The sales report fed optimism that consumer spending would probably be flat to modestly lower in the second quarter, instead of falling sharply as expected by most analysts.
Spending, which accounts for about 70 percent of U.S. economic activity, rose 1.5 percent in the January-March period, after a 4.3 percent dive in the fourth quarter.
Because rising gasoline prices aided last month’s retail sales gain, consumer purchasing could slow in other areas.
Meantime, the number of U.S. households on the verge of losing their homes dipped in May from April, and the annual increase was the smallest in three years, the AP also reported.
Foreclosure filings fell 6 percent in May from April, according to RealtyTrac Inc. More than 321,000 households received at least one foreclosure-related notice last month–18 percent more than a year earlier–but the smallest annual gain since June 2006.
As layoffs, rather than risky mortgages, become the main reason that borrowers default on their home loans, many economists expect foreclosures likely will remain elevated this year and into 2010.
Banks repossessed about 65,000 homes in May, up from 64,000 in April, due to big increases in several states including Michigan, Arizona and Nevada.
The Obama administration announced a plan in March to provide $50 billion from the financial industry rescue fund as an incentive for the mortgage industry to modify loans at lower monthly payments.
On Wall Street, investors welcomed the better-than-expected report on jobless claims and growth in retail sales, pushing stocks higher Thursday morning. Rising interest rates have recently become a concern and had sent stocks lower on Wednesday.