Reports Signal Robust Growth Retailers Ring Up Strong Sales; Factory Orders Hit Record

U.S. factories hummed this summer and shoppers returned to the nation’s retail stores, suggesting economic growth continued at a robust pace.

Orders to factories inched up only 0.2 percent in July but that was enough to raise orders to a record seasonally adjusted $330.3 billion, the Commerce Department said Thursday.

Economists had been looking for a small decline. The unexpected increase came atop a strong 1.7 percent gain in June, the largest in five months and better than the 1.2 percent estimated a month ago.

Meanwhile, major retailers, who suffered through a dismal spring and early summer, reported buyers snapped up new fall merchandise, especially children’s clothes and personal computers.

Also, Ford Motor Co. said its August sales were up 3.4 percent from last year. That came a day after General Motors Corp. and Japanese automakers reported a healthy 7 percent increase in U.S. sales of cars and light trucks, and Chrysler said it had stemmed sales declines.

“This is further evidence to support the idea the consumer is back and that the spring lull was just that, a lull and not a trend,” said economist Dan Laufenberg of American Express Financial Advisors Inc. of Minneapolis.

Analysts were split over whether the new data implied the Federal Reserve was more likely to raise interest rates to slow the economy.

Monetary policy-makers haven’t touched short-term interest rates since March, but Laufenberg said chances are better than even they’ll nudge rates up by a quarter percentage point when they meet next on Sept. 30.

However, economist James Glassman of Chase Securities Inc. said there are few bottlenecks that might create price-increasing shortages and delivery delays.

In an indication factories were keeping up with the flow of new orders, shipments rose 1.4 percent in July. That whittled the backlog of unfilled orders by 0.5 percent, the first drop since April. Inventories increased 0.5 percent, the 12th rise in 13 months and a sign that manufacturers won’t need to play catchup to meet future demand.

“I don’t think there are any major imbalances,” Glassman said. “That leaves the Fed on the sidelines for awhile.”