Consumers increased their spending in July by the most in five months, opening their wallets after a frugal spring and offering hope the slumping economy may rebound in the second half.
Spending rose in every major category, from electronics and sporting goods to furniture, building supplies and garden equipment. The report from the government followed one earlier this month that showed hiring strengthened in July.
Overall retail sales rose 0.8% from June to July, the Commerce Department said. It was the sharpest increase since February, and it followed three months of declines.
The stepped-up spending was evident in a flurry of retail earnings reports for the fiscal second quarter, which ended in late July.
Home Depot, the nation's largest home-improvement retailer, said healthy sales of paint, bathroom accessories and kitchen installations helped lift its net income 12%.
Macy's raised its annual earnings guidance last week after reporting a 16% increase in net income in the second quarter. Macy's executives specifically cited a pickup in their teen clothing business, which had been weak.
TJX Cos., which sells discounted brand names under such store banners as T.J. Maxx and HomeGoods, said its second-quarter net income jumped 21% on better same-store sales.
"People are spending a little more and feeling a little better about the economy," said James Donnelly, a sales associate at Boston-based Tadpole, which sells children's clothing and toys.
Consumers appear to be taking their cues from the economy's modest but steady improvements.
Employers added 163,000 jobs in July, the best month for job growth since February. Home prices are up. The value of U.S. exports reached a record high last month. And stock indexes are near their highs for the year.
"I am looking for a better second half of the year, in part because I think business will become more confident, and they will increase their hiring," said Joel Naroff, chief economist at Naroff Economic Advisors.
Some economists cautioned that part of the July increase in retail spending was inevitable after consumers cut spending in each of the months in the April-June quarter. Consumers will likely sustain their spending increases only if hiring continues to strengthen, they said.
