US retail sales up 0.6% in July on strong car sales

U.S. retail sales rebounded in July as households boosted purchases of automobiles and a range of other goods, suggesting solid momentum in the economy early in the third quarter.

The upbeat report from the Commerce Department on Thursday should strengthen expectations of a Federal Reserve interest rate hike as early as next month.

Retail sales increased 0.6 percent last month. June's retail sales were revised up to show them unchanged instead of the previously reported 0.3 percent drop. Economists polled by Reuters had forecast retail sales rising 0.5 percent in July.

Retail sales excluding automobiles, gasoline, building materials and food services rose 0.3 percent after a revised 0.2 percent gain in June. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Core retail sales were previously reported to have dipped 0.1 percent in June. Economists had forecast core retail sales rising 0.5 percent in July.

The retail sales report added to July's fairly upbeat employment and small business confidence reports in suggesting the economy was growing at a steady clip at the start of the third quarter. GDP expanded at a 2.3 percent annual pace in the April-June quarter.

However, June data on factory inventories and imports as well as upward revisions to May construction spending figures have left economists expecting that the advance second-quarter GDP growth figure could be raised to at least a 3.0 percent pace.

The government will publish its second GDP growth estimate later this month. Given the steadily firming economy, many economists expect the Fed will raise its short-term lending rate in September for the first time in nearly a decade.

Financial markets have, however, shifted their rate hike expectations toward December following China's devaluation of its currency this week.

Sales last month increased almost broadly, with receipts at auto dealerships increasing 1.4 percent after falling 1.5 percent in June. Clothing stores sales rose 0.4 percent.

Receipts at building materials and garden equipment stores advanced 0.7 percent and sales at furniture stores rose 0.8 percent. There were also increases in sales at online stores and at restaurants and bars.

Receipts at sporting goods and hobby stores rose 0.9 percent. Sales at electronics and appliance stores fell 1.2 percent. (Reporting by Lucia Mutikani; Editing by Paul Simao)