Subject Author Date Time Information And On the Home Front (SAMPLE)Bill VogelAug 11, 200610:48 AMCity Council BlogNew London RepublicansWASHINGTON -- Retail sales surged well beyond expectations during July in a signal of economic strength as consumers snapped up discounted cars, pumped expensive gas, and ducked into shopping malls to escape broiling summer heat.

Sales increased by a seasonally adjusted 1.4% from the previous month, the Commerce Department said Friday. June sales fell by 0.4% -- revised down from a previously estimated 0.1% dip.

The median estimate of 22 economists surveyed by Dow Jones Newswires and CNBC had retail sales rising 0.9% in July. The increase was the largest since January, when sales leaped 3.0%.

The retail sales report is a window to how Americans part with their money. And consumer spending is a pivotal part of the equation used to figure out how the economy is faring. Spending makes up about 70% of gross domestic product.

GDP braked sharply in the second quarter, increasing 2.5% after a 5.6% run January through March. The 1.4% climb in July retail sales sent the economy off to a strong third-quarter start, but analysts have said spending on cars and other things could retreat as summer wears on.

Auto and parts retail sales in July increased by 3.1% as carmakers seeking to clear away 2006 models offered aggressive incentives to entice customers. June auto sales had fallen 2.5%.

Outside the auto sector, all other retail sales also surged, up 1.0%. Economists expected a 0.5% increase. Sales excluding autos had gone up a mere 0.1% in June.

With high prices lifting the value of receipts, gas station sales increased by 2.5% last month after rising 0.8% in June. Stripping away sales at gas stations, demand at all other retailers was up 1.3% in July. Excluding both autos and gasoline, all other retail sales rose 0.7% in July. Demand excluding gas and autos was flat in June.

Abnormal heat throughout the U.S. pushed Americans into air-conditioned shopping malls, analysts say. Humid high temperatures were also seen boosting sales of summer clothing and other seasonal merchandise.

The Commerce data Friday showed demand rose 1.8% in July at building material and garden stores and 0.7% at clothing stores.

Sales advanced 0.3% at general merchandise stores; 0.6% at health and personal care stores; 0.3% at food and beverage stores; 0.5% at furniture stores; 0.6% at restaurants and bars; 2.1% at mail order and Internet retailers; and 1.9% at electronics and appliance stores. Demand fell 0.2% at sporting goods, hobby and book stores.

Meanwhile, prices for imported goods spiked higher in July due to rising energy prices, but outside of oil they remained well contained, thanks in part to falling prices of imports from China and Japan.

Import prices increased 0.9%, after showing no change the prior month, the Labor Department said Friday. June's figure was revised down from a previous estimate of a 0.1% rise. Wall Street economists had expected July import prices would rise by 1%. In the 12 months through July, import prices increased by 7%.

Write to Jeff Bater at jeff.bater@dowjones.com

Comment from Bill Vogel at bill@myeastern.com on Fri Aug 11 09:52:40 CDT 2006

Sounds good to me.