"Consumers are still able to go out there and spend despite headwinds from tax increases and the sequester"
- Omair Sharif, a U.S. economist at RBS Securities Inc.
Retail sales in the world's largest economy posted their biggest gain in seven months in July, another signs of quicker economic growth, that could strengthen the case of a tapering of quantitative easing in September. A report from the Commerce Department showed that a primary gauge of consumer spending gained 0.2% last month, following a 0.6% gain in June that was larger than previously reported. The majority of analysts, however, pointed at a 0.3% advance. The slowdown in the demand was seen mainly at car dealers, as car sales dropped the most since October 2012, tumbling 1%, after a 11.8% growth a month earlier. In addition to that, the measure of demand that feeds into the nation's gross domestic product climbed by the most in 2013. Excluding transportation, core retail sales, which are revealing a clearer picture about consumers' willingness to increase spending, rose 0.5%, outpacing analysts' projections of 0.4% rise.
Core retail sales data is a key component of the department's measure of consumer spending, which accounts for around 70% of national output. Last month's gain was the biggest since December, reflecting the improvement in consumers' mood and suggesting the economy could be regaining steam after a recent sequester- a set of tax hikes and budget cuts, which dragged on growth in the first half of the year.
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