Retail sales rebound in July

NEW YORK (CNNMoney.com) -- After two months of declines, retail sales rebounded in July, the government said Friday.

Total retail sales rose 0.4% to $362.7 billion, compared with June's 0.3% decrease, the Commerce Department said. The June drop was revised from the originally reported 0.5%.

The overall sales percentage gain was slightly lower than anticipated. Economists surveyed by Briefing.com had expected sales would rise by 0.5% during the month.

Consumer spending accounts for two-thirds of U.S. economic activity, so retail sales and related reports are closely monitored to gauge the health of the economy.

Sales excluding autos and auto parts rose 0.2% last month, in line with economists' forecasts. In June, sales on the same basis were down 0.1%.

Motor vehicle and parts sales also rose 1.6% in the month, and gasoline store sales rose 2.3%.

As the recovery tugs along at a slower pace than most analysts had originally expected, consumers are still cautious about their spending. But July also marked the start of back-to-school shopping season, which often means a boost in sales.

"Back-to-school has accelerated into the July timeframe and we certainly know that parents are expecting to spend more than they did last year. The July numbers would indicate that that's going to be playing out through August as well," said Janet Hoffman, managing director of consultant firm Accenture's retail practice.

Overall, retail sales are up 5.5% over July last year, the government report said.

But the year-over-year comparison is not necessarily something to "jump for joy over," as retailers come off some deep hits last year during the downturn, said Doug Hart, a partner in the consumer product division of business services firm BDO.

On a month-to-month basis, sales are still showing relatively flat to modest gains in line with a slow recovery, he said.

"Consumers are still looking for value. They're still cautious," Hart said.

Analysts also often look to back-to-school season to forecast how retailers will fare during their most profitable season - the winter holidays.

Hoffman said she doesn't expect a "shocking uptick" in retail sales during the holidays, but is forecasting sales growth for that period.