Retail sales still in slump
WASHINGTON — The outlook for the U.S. economy appeared dimmer Monday after a report that Americans spent less at retail businesses for a third straight month in June.
The report led some economists to downgrade their estimates for economic growth in the April-June quarter. Many now think the economy grew even less than in the first quarter of the year, when it expanded at a sluggish 1.9 percent annual rate.
Spending in June fell in nearly every major category — from cars, furniture and appliances to building, garden supplies and department stores. Overall, retail sales slid 0.5 percent from May to June, the Commerce Department said.
Retail sales hadn’t fallen for three straight months since the fall of 2008, at the height of the financial crisis.
The weak U.S. spending figures were announced on the same day the International Monetary Fund slightly lowered its outlook for global growth over the next two years.
Stocks fell after the Commerce report was released. Later in the morning, stocks regained some of their losses.
“However hard you look, there’s just no good news in this report at all,” said Paul Ashworth, chief U.S. economist at Capital Economics.
Sales were still 4.7 percent higher in the April-June period than in the second quarter of 2011. And retail sales don’t include spending on services, which represents a larger portion of the economy.
Still, Ashworth said overall economic growth likely slowed to an annual rate of just 1.5 percent in the second quarter. That isn’t enough to lower high unemployment. The U.S. unemployment rate is 8.2 percent.
In Monday’s report, the Commerce Department also said Americans spent less in April than previously thought. In part because of that, Michael Feroli, an economist at JPMorgan Chase, lowered his estimate of growth in the April-June quarter from a 1.7 percent annual rate to a 1.4 percent rate.
Some of the sting of the retail sales report was eased by a separate Commerce report Monday that U.S. companies added to their stockpiles in May. When businesses step up restocking, they tend to order more goods, leading to more factory production and economic growth.
The weak retail sales in recent months reflect, in part, falling gas prices. But even excluding sales at gas stations, retail spending fell 0.3 percent from May to June.
Consumers have grown less confident in the economy. Hiring has slumped and wages have barely kept pace with inflation, keeping budgets tight. As a result, consumers have pulled back on their spending, which drives 70 percent of economic activity.
