Purchases sink 0.5% in June as the nation’s economy slows
WASHINGTON (MarketWatch) — U.S. retail sales fell in June for the third straight month as consumers cut spending on most goods and services, reflecting a sharp slowdown in economic growth in the second quarter.
Retail sales slumped a seasonally adjusted 0.5% in June following declines in May and April, the Commerce Department reported Monday.
The last time the U.S. experienced three straight monthly drops in retail spending was in the second half of 2008, midway through the Great Recession.
The weak retail report fell well short of Wall Street expectations and sent U.S. stocks lower in early action. Economists surveyed by MarketWatch had forecast a 0.2% increase in sales.
“The soft patch in the U.S. economy looks just a bit softer after today’s news,” said economist Avery Shenfeld at CIBC World Markets.
Without stronger retail sales, the U.S. economy cannot expand faster and dramatically lower the nation’s high 8.2% unemployment rate. Retail spending accounts for more than two-thirds of the nation’s economic growth.
Sales fell in each month of the second quarter. Sales in May were unchanged at a 0.2% decline, while sales in April were revised down to a 0.5% drop from a 0.2% reduction.
The pullback in spending suggests the U.S. grew at a 1% to 1.5% pace in the second quarter, most economists estimate. That’s down from 1.9% in the first quarter and 3.0% in the last three months of 2012.
Inside retail report In somewhat of a surprise, spending on autos declined 0.6% even though industry figures showed that purchases of cars and trucks increased in June after falling in May. Analysts say the decline suggests auto makers offered bigger price discounts last month and sold more vehicles to corporate customers.
Excluding autos, retail sales fell 0.4%. Economists were expecting no change in that category.
The biggest decline occurred at gas stations, which is a good thing for consumers. Sales fell 1.8%, leaving more cash in Americans’ pockets.
Yet spending also fell sharply at most other stores, indicating consumers choose to pocket what they saved at the pump. Their hesitancy to spend might also indicate growing caution in light of the weakening economy.
Sales sank at stores that sell building materials (-1.8%), sporting goods and leisurely items (-1.6%), home furnishings (-0.8%), electronics and appliances (-0.8%) and personal-care items (-0.7%).
The only retailers to report higher sales were clothing outlets, groceries, liquor stores and Internet sites such as Amazon. The increases were small, however.
In the past 12 months, U.S. retail sales are up a seasonally adjusted 3.5%, but they’ve dropped 0.6% in the past three months.