U.S. retail sales fall for 3rd straight month
Retail sales fell in June for the third straight month, knocking down economic growth projections for the second quarter and dimming the outlook for hiring in the near term.
The 0.5% drop from May was broad-based; consumers pulled back on spending for cars, electronics, furniture, building materials and other goods, the Commerce Department reported Monday.
The report surprised analysts, who were expecting a small increase in retail sales after two prior months of declines. It was the first time since the fall of 2008, when the recession was in full bloom, that retail sales fell three consecutive months.
Consumer spending, which accounts for about 70% of the American economy, has weakened amid persistent worries about Europe’s debt crisis, slumping job growth at home and uncertainties about taxes and fiscal spending cuts.
Some economic forecasters immediately shaved their projections for second-quarter economic growth closer to 1%, half of the annual pace posted in the first quarter. The anemic growth rate doesn’t bode well for job creation and the prospects for lowering the unemployment rate, which has been stuck at 8.2% the last two months.
“Weaker demand will give businesses yet another reason to be cautious in their hiring,” said Scott Hoyt, an analyst at Moody’s Analytics, commenting in a research note on Monday’s retail sales numbers.
“Consumer fundamentals are weak,” he added, “and while they are still expected to improve in the second half of the year, risks to that outlook are increasing.”
Chris Rupkey, chief financial economist at the Bank of Tokyo-Mitsubishi in New York, said three straight months of falling retail sales used to be seen as a signal of recession. But he said it wasn’t time to be panicking.
For all of the second quarter, retail sales were down 0.8%, he said, following a 6.7% jump in the first quarter and an 8.8% increase in the fourth quarter of last year.
“It is a slowdown, and may be nothing more,” Rupkey said in a note to clients. “A temporary setback.”
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