Patrice Stewart (right) and her cousin Jhennel Bryan shop for back-to-school clothes at Macy's, last Thursday, in New York. Consumers went shopping for clothes, furniture and electronic products last month, helping give a modest boost to retail sales despite continued weakness in the demand for new cars. The Commerce Department reported Monday, August 13 that retail sales edged up 0.3 per cent in July after having plunged by 0.7 per cent in June, the worst showing in 16 months. - Ap

WASHINGTON (Reuters):

Consumers spent more boldly than expected last month as declining gasolene prices shielded household budgets, United States (U.S.) government data showed yesterday.

Sales at U.S. retailers rose a slightly more-than-expected 0.3 per cent in July and core sales that strip out car, building materials and gasoline sales were even stronger, the Commerce Department data showed.

Investors took heart from the news, with Wall Street stocks opening higher. The dollar pared losses against the yen and the prices on U.S. government treasury bonds retreated after the sales data eased concerns over slowing U.S. growthand the health of the consumer.

Excluding autos, retail sales were up 0.4 per cent in July as forecast and the prior month was revised to a 0.2 per cent decline versus a 0.4 per cent fall initially reported.

Economists polled by Reuters forecast overall retail sales to rise 0.2 per cent, compared with a revised 0.7 per cent drop in June, previously reported as a 0.9 per cent drop.

Core retail sales increase

"Not only did the month of July come in a little stronger than expected, but June was revised upward to reflect less of a decline which will be good for the stock market," said Richard Huber, an economist at A.G. Edwards and Sons in St. Louis.

So-called core retail sales, which exclude cars, gasolene and building materials, were up 0.6 per cent from a 0.3 per cent gain in June.

In the retail sales report, purchases of motor vehicles and parts, which make up around one fifth of total sales, fell 0.3 per cent. Gasolene, which can have a big impact on consumer spending, fell 0.8 per cent.

Economists had also expected a strong U.S. jobs market to support consumption, despite the impact of cooling U.S. housing and turmoil caused by problems in the market for subprime mortgages for borrowers with risky credit.

In fact, furniture and home furnishings sales rose 0.5 per cent and building material and garden supplies were up 0.2 per cent. Sales of clothing and accessories jumped 1.3 per cent, while sales at food and beverage stores, health and personal care also advanced.

The reported strength was somewhat at odds with the news from U.S. retailers, who had generally announced disappointing sales in July. Wal-Mart Stores Inc, the world's largest retailer, reported a 1.9 per cent rise in July sales at U.S. stores but said it had cut prices to attract shoppers.

BUSINESS INVENTORIES UP

In other Commerce Department data yesterday, inventories at U.S. businesses rose 0.4 per cent in June as forecast.

The gain in stocks at hand followed an unrevised 0.5 per cent rise inMay. Sales dipped 0.3 per cent in June after climbing 1.3 per cent the previous month.

Economists monitor the data for clues on whether businesses are building stocks in anticipation of rising demand the judgment is tricky since an increase in inventories can also reflect weaker than anticipated sales.

June's inventory-to-sales ratio, a measure of how long it would take to deplete stocks at the current pace of sales, edged up to 1.27 months' worth from 1.26 in May.

The June build-up of motor vehicles and parts at businesses mounted 1.0 per cent, posting the category's largest monthly increase since June of 2006, when they jumped 1.3 per cent. The U.S. auto industry has been forced to bolster sales through a program of aggressive incentives.