In July, Americans were eager shoppers

WASHINGTON — Reviving talk of further interest-rate increases, U.S. retail sales increased at the fastest pace in six months last month, rising 1.4 percent on higher auto and gasoline sales, the Commerce Department reported Friday.

Higher sales were seen across the board, from electronics to clothing. Sales of durable goods were particularly strong.

"The reports of the consumers' demise appear to be premature," said Joel Naroff, president of Naroff Economics.

Other economists, however, said the longer forecast looks for weaker consumer spending.

"Retailing is holding up quite well, but we expect a sustained slowing over the next few months," said Ian Shepherdson, chief U.S. economist for High Frequency Economics.

Auto sales surged 3.1 percent in July, the biggest gain since January.

Gasoline sales jumped 2.5 percent on higher prices. Excluding gasoline, retail sales rose 1.3 percent. The figures are not adjusted for inflation.

The better-than-expected results were offset to some extent by the 0.3 percent downward revision in June's sales to a 0.4 percent decline. Sales excluding autos were also revised lower in June to a 0.1 percent gain.

The health of the consumer has been the largest question mark in the economy. Real consumer spending, which accounts for about two-thirds of final sales, increased at a soft 2.5 percent annual pace in the second quarter.

The July retail results show the third quarter started off stronger, a sign that any slowdown in the economy could be short-lived.

The Federal Reserve held interest rates steady at this week's meeting, in part to give policymakers time to assess the state of consumers, who have been battered by high energy costs, higher interest rates, tepid wage growth and a collapsing housing market.

Still, consumers have held up. Retail sales are up 4.8 percent in the past year.

The odds of a rate increase by the Fed at next month's meeting rose to about 36 percent from 24 percent before the data were released, according to futures contracts on federal funds at the Chicago Board of Trade.