Sales at retailers fell for a second straight month in June on weak receipts at automotive dealers and gasoline stations, further evidence the economic recovery has slowed in the past few months.
Retail sales slipped 0.5 percent after a 1.1 percent drop in May, the Commerce Department said on Wednesday. Analysts had expected a drop of just 0.2 percent in June.
The report was a latest in a series of weak data — from homes sales to factory activity to hiring — to suggest the recovery from the most severe recession since the 1930s is softening a bit earlier than economists had expected.
"You have seen a little bit of cooling on the consumer side of the ledger," said Kevin Flanagan, chief fixed income strategist at Morgan Stanley Smith Barney in Purchase, N.Y. Still, he said a "double dip" recession did not appear in the cards.
The broad Standard & Poor's 500 index opened lower, although the tech-heavy Nasdaq rose modestly on better-than-expected results from Intel Corp. U.S. Treasury debt prices were higher.
After strong gains in the first quarter, consumer spending is losing steam as households grapple with a 9.5 percent unemployment rate and sluggish income growth. In June, earnings slipped as employers trimmed working hours.
Slackening demand may already be making businesses wary of building inventories, an exercise that has been largely behind the economic recovery that started in the second half of 2009.
Business inventories barely rose in May as sales fell for the first time since March 2009, the Commerce Department said in a second report.
The sluggish recovery and lofty unemployment have become a
headache for President Barack Obama and his fellow Democrats on Capitol Hill, who face a struggle to maintain majorities in the House of Representatives and Senate in November elections.
Republicans charge that Obama's efforts to stimulate the economy have failed, although the White House argued on Tuesday that the $862 billion stimulus plan it backed has saved or created 3 million jobs.
The U.S. Chamber of Commerce on Wednesday credited the administration with helping to stabilize the economy, but said it had also created an environment of regulatory uncertainty that was restraining business activity.
Last month, motor vehicle and parts purchases were a drag on overall retail sales, dropping 2.3 percent after falling 0.6 percent in May. Excluding autos, sales dipped 0.1 percent last month after dropping 1.2 percent in May. Markets had expected sales excluding autos to be flat.
Although the retail sales report showed weakness in some key categories, core retail sales, which exclude autos, gasoline and building materials, rose 0.2 percent after slipping 0.1 percent in May.
Core sales correspond most closely with the consumer spending component of the government's gross domestic product report.
Receipts at gasoline stations fell 2 percent last month after dropping 2.5 percent in May, reflecting weak gasoline prices during the month.
"The consumer is not dead," said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, N.Y. "We could really see the consumer come back at any moment here, especially if hiring begins to pick up."
Building materials and garden equipment sales fell 1.0 percent, extending the prior month's 9 percent decline as government incentives to spur purchases of energy-efficient appliances ended.
The decline in sales of building material also follows the end of a popular homebuyer tax credit, which is also weighing on demand for loans to buy homes.
Demand for home purchase loans fell to a 13-year low last week, and refinancing demand also slid despite near record-low mortgage rates, the Mortgage Bankers Association said on Wednesday.
In a third report, the Labor Department said U.S. import prices dropped 1.3 percent in June, the biggest decline since January 2009, led by declining fuel prices.
It was the second consecutive monthly decline in import prices and pointed to mute inflation pressures.
According to a Reuters survey published on Wednesday, economists have scaled back their growth expectations for the second quarter through next year, prompted by the recent batch of weak economic data.
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