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Retail sales jump 0.7 %
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August 12, 1999: 9:50 a.m. ET
July figure stronger than projected, but June rate revised downward
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NEW YORK (CNNfn) - Retail sales rose at an unexpectedly strong rate in July, according to Commerce Department data released Thursday, a sign that the economy may be expanding more rapidly than thought.
Sales rose 0.7 percent last month, compared with economists' estimates for a gain of 0.3 percent, according to a Reuters poll. But the June sales rate was adjusted downward to a decline of 0.2 percent, from a gain of 0.1 percent first reported.
Auto sales rose 2.3 percent last month. Excluding autos, retail sales rose only 0.3 percent for the month, down from estimates of 0.4 percent. June figures excluding auto sales were revised to 0.1 percent, slower than the 0.4 percent initially reported.
The bond market was little changed on the news. The benchmark 30-year Treasury dropped 1/32 of a point in price for a yield of 6.21 percent, after the 8:30 ET report was released.
The stronger-than-expected report points to still-booming growth in the U.S. economy, and is the latest in an array of reports that could give Federal Reserve policy makers food for thought at their next meeting Aug. 24.
Many economists now expect the Fed to raise short-term interest rates to keep the economy from overheating and head off inflation, especially after a pair of reports showing a jump in the employment cost index in the second quarter and surging job creation and wages in July.
Economists said the figures were negative and could lead to a rate increase, but were adamant the retail report was far from dire.
"This is further confirmation that the economy does not appear to have started to slow down," said Thomas Riordan, a money market portfolio manager at Dreyfus Corp. "So there's a real possibility that the Fed could raise interest rates by 25 basis points in August. The market has started to price that in."
Harvinder Kalirai, North American economist with IDEAglobal.com, said the figures weren't much of a surprise. "July was much stronger than expected, but when you factor in the revisions to June, there's only a 0.4 percent increase ... I think these numbers are very close to consensus forecast."
Also Thursday, in another sign of the job market that's likely factor into the Fed's composite picture of the economy, the Labor Department reported that first-time jobless claims in the last week rose to 284,000, up 4,000 from the prior week but short of the 294,000 economists expected.
The retail sales report comes the same day several of the nation's leading retailers are expected to report quarterly earnings, including Kmart (KM), which beat analysts' estimates. 
-- from staff and wire reports
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