WASHINGTON (AP) -- Americans likely stepped up spending at retail businesses in May, helped by another month of strong auto sales. The gain would show consumers remain resilient despite higher taxes and could help drive growth later this year.
Economists forecast that retail sales rose 0.4 percent last month, according to a survey by FactSet. That would be an improvement from the slight 0.1 percent gain in April.
The Commerce Department will release the report at 8:30 a.m. EDT Thursday.
The retail sales report is closely watched because it is the government's first look each month at consumer spending, which accounts for 70 percent of economic activity.
The details of the April report were encouraging after looking past a drop in gas prices. The report is not adjusted for price changes.
Excluding gas stations sales, retail sales rose 0.7 percent. And Americans bought more cars, clothes, electronics and appliances. The increase suggested that steady job growth and rising home prices could be enough to offset the impact of higher Social Security taxes.
But a broader measure of consumer spending, which includes spending on services, declined in April as Americans' income failed to grow. That raised worries that the tax increases, along with government spending cuts, might be starting to catch up with the consumer.
Americans are taking home less pay this year because of a 2 percentage point increase in Social Security taxes. A person earning $50,000 a year has about $1,000 less to spend this year. A household with two high-paid workers has up to $4,500 less.
And the spending cuts have forced the government to furlough workers, which has also reduced paychecks for some workers.
The economy grew at a solid annual rate of 2.4 percent in the first three months of the year. Consumer spending rose at the fastest pace in more than two years.
Most economists say growth is slowing in the April-June quarter to an annual rate of 2 percent or less. But many expect growth will pick up again at the end of the year.
Still, there are other signs consumers may keep spending, despite the hit to their paychecks.
Consumer confidence rose to five-year high in May, helped by an improving job market, rising home prices and solid stock market gains.
The economy created 175,000 jobs in May, almost exactly matching the average increase of the previous 12 months.
Some of the nation's large retail chains reported stronger sales in May. Revenue at stores open at least a year rose 3.2 percent in May compared to the same month a year ago, according to a tally of 12 retailers by the International Council of Shopping Centers.
Auto sales posted a strong gain in May, led by strong demand for full-size pickup trucks. Low-interest rates and Memorial Day sales also proved a lure to buyers who pushed sales to 1.4 million vehicles in May, up 8 percent from the same month a year ago, according to Autodata Corp.
Home sales have also proven a bright spot this year and rising home prices have made home owners feel wealthier, a development that should support further gains in consumer spending.
The gains in home sales and auto sales have been supported by the Federal Reserve's low interest rate policies. The central bank is buying $85 billion per month in bonds to keep downward pressure on long-term rates. Fed policymakers hold a two-day meeting next week that will be closely watched for any signals that the Fed is considering starting to withdraw some of its economic support.
Many private economists believe any tapering of the bond purchases will not begin until September at the earliest because of Fed concerns about the effect the government's spending cuts will have on growth.
