U.S. retail sales rise modestly on surprise automobiles decline

WASHINGTON (Reuters) - U.S. retail sales increased less than expected in June as receipts at automobiles dealerships surprisingly fell, but details of Tuesday's report suggested the economy was on a solid footing at the end of the second quarter.

The Commerce Department said retail sales rose 0.2 percent last month after an upwardly revised 0.5 percent advance in May.

Economists polled by Reuters had forecast retail sales, which account for a third of consumer spending, rising 0.6 percent after a previously reported 0.3 percent gain in May.

So-called core sales, which strip out automobiles, gasoline, building materials and food services, and correspond most closely with the consumer spending component of gross domestic product, increased a solid 0.6 percent in June.

Core sales rose by a revised 0.2 percent in May. They were previously reported as being flat and economists had expected them to rise 0.5 percent in June.

Despite the below-expectations rise in overall sales, June's retail sales report was the latest sign of the economy's strengthening fundamentals, which could buoy optimism the recovery is on a self-sustaining path.

The economy contracted sharply in the first quarter, but that was probably just a temporary setback.

From employment to manufacturing, the economy appears to be firing on nearly all cylinders with even housing appearing to be regaining its footing after slumping in late 2013 following a run-up in mortgage rates. Growth estimates for the second-quarter top a 3.0 percent annual rate.

Overall retail sales last month were held back by a 0.3 percent fall in receipts at auto dealerships. The decline is surprising given that automakers reported a surge in motor vehicle sales in June. Auto sales had increased 0.8 percent in May.

Excluding autos, sales increased 0.4 percent after rising by the same margin in May.

Sales at non-store retailers, which include online sales, increased 0.9 percent. Receipts at gasoline stations gained 0.3 percent, and sales at clothing retailers advanced 0.8 percent.

Receipts at sporting goods shops rose 0.6 percent and sales at electronics and appliances stores gained 0.1 percent.

But sales at building materials and garden equipment suppliers fell 1.0 percent.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)