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US retail sales fall for second month
Jul. 16th, 2010
US retail sales fall for second month
AFP
AFP Global Edition
Jul 14, 2010 12:07 EDT
US retail sales fell more than expected in June for a second straight month, the government said Wednesday, underscoring concerns about slower growth in the world's largest economy.
Sales declined 0.5 percent from May to 360.2 billion dollars, pulled down by sharp declines in autos, gasoline and building materials, according to the Commerce Department.
Most economists had expected June sales to decline by 0.2 percent from a larger 1.1 percent fall the previous month.
Consumer spending is a key engine of growth for the world's largest economy recovering from a brutal recession that struck in December 2007.
Sales tumbled at vehicle dealerships and gasoline stations as well as stores selling sporting goods, furniture and building supplies, data showed.
In contrast, electronics and appliance and department stores reported strong sales growth.
A series of recent government and private data signaled that US economic recovery since the middle of last year is slowing down amid high unemployment and the end of various stimulus programs.
With the jobless rate at 9.5 percent and employment opportunities lackluster, analysts do not believe consumer spending will continue to be a key catalyst for growth after driving economic expansion in the first quarter of the year.
"Consumers remain financially constrained. Unemployment is high and wage gains are small," said Scott Hoyt, senior director of consumer economics for Moody's Economy.com.
With confidence impacted, "consumers will not lead the recovery," he said.
Although two consecutive months of declining retail sales may not be a definitive trend, "it does tell us that all the reports that households still believe the recession continues on is translating into minimal spending," said Joel Naroff, chief economist at Naroff Economic Advisors.
"Slow job and income growth coupled with weak consumer confidence doesn't set the stage for a major rebound in spending," he said.
In fact, second quarter consumer spending has slowed more than it previously appeared, noted Chris Christopher, economist at IHS Global Insight.
"The consumer is troubled by high and persistent unemployment rates, reduced values of residential properties, tight credit, and high debt burdens."
Spending growth in the second quarter is now likely to come in at 2.2 percent, down from 3.0 percent in the first quarter, Christopher said.
The US economy grew by 2.7 percent in the first quarter of 2010 but analysts have trimmed between one and two percentage points to growth in the April-June period to about 3.0 percent.
While consumption growth is expected to remain positive for the remainder of the year, the strength of its contribution to US gross domestic product "will be weak unless the private sector opens up its doors and starts to rehire," said economist Jeffrey Rosen at Briefing.com.
But he believed there were some hopeful signs.
After two months of declines, core retails sales -- which exclude the highly volatile motor vehicle dealers, building materials, and gasoline stations -- rose a healthy 0.2 percent in June.
Core sales track much more closely to the long-term consumption growth pattern than the headline number.
Source: AFP Global Edition
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