Retail Sales Hurt by Energy Costs

U.S. retail sales fell in June by the most since February 2003, adding to evidence that consumer spending slowed in the second quarter as energy costs soared.

The 1.1% decline reflected a drop in spending at automobile dealerships and department stores and followed a revised 1.4% increase in May, the Commerce Department said Wednesday. Economists forecast a 0.8% decrease.

Gasoline prices, which held above $2 a gallon on average in May and June, limited sales at Wal-Mart Stores Inc. at the same time that autos sold at the slowest annual rate in six years. Consumer spending slowed last quarter and may pick up again in coming months, executives and economists said.

“We look for June’s retail sales drop to be a small bump in the road,” said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Conn., who correctly forecast the June decline. “As long as employment growth remains vigorous, income gains should be sufficient to support robust spending.”

A separate Labor Department report showed import prices fell 0.2% in June, the first decline in nine months, on lower costs for petroleum, food and industrial supplies. Excluding energy, the index of import prices was unchanged.

Retail sales excluding vehicles and parts fell 0.2% after rising 0.9% a month earlier.

Sales at automobile dealerships and parts stores dropped 4.3% last month, the biggest decline since February 2003, after rising 3.2%. Vehicle purchases slowed to a 15.4-million-vehicle annual rate in June from 17.8 million in May, according to industry figures this month. That was the slowest since August 1998, as incentives at General Motors Corp. and Ford Motor Co. lured fewer buyers.

Still, retailers including Bentonville, Ark.-based Wal-Mart and Plano, Texas-based J.C. Penney Co. said gasoline prices, which rose by a third from a year earlier, left consumers with less to spend in June on clothes and other items.

Sales at general merchandise stores, which include department stores, fell 0.2% last month after rising 1.1% in May. Department stores sold 0.8% less merchandise last month. Sales at clothing and accessory stores declined 0.5% after rising 1.4%.

Sales rose 0.5% at electronics and appliance stores, 1.1% at furniture stores and 0.6% at sporting goods, hobby, book and music outlets. Sales at building material and garden supply stores rose 0.1%.