Retail sales fall for third straight month in June

WASHINGTON Mon Jul 16, 2012 3:10pm EDT

A customer passes a display of tools at a Lowe's store in Quincy, Massachusetts February 23, 2011. REUTERS/Brian Snyder

A customer passes a display of tools at a Lowe's store in Quincy, Massachusetts February 23, 2011.

Credit: Reuters/Brian Snyder

WASHINGTON (Reuters) - Retail sales fell in June for the third straight month, the longest run of consecutive drops since 2008 when the country was mired in recession.

Sales slipped 0.5 percent, with declines across a wide swath of industries from electronics and cars to building supplies, the Commerce Department said on Monday. Analysts had expected a small increase.

"Evidence is increasingly clear that the U.S. economy is slowing," said Jim Baird, an investment strategist at Plante Moran Financial Advisors in Kalamazoo, Michigan.

The report adds to a spate of soft economic data that is raising pressure on President Barack Obama ahead of his November re-election bid. Republican challenger Mitt Romney is focusing his campaign on the weak economy, which has plagued Obama's presidency.

The dollar declined against the euro and the yield on 10-year U.S. government bonds dropped to an all-time low as the data stoked worries the economy was floundering and could need more help from the Federal Reserve. U.S. stock prices sank.

Fed Chairman Ben Bernanke will testify to lawmakers on Tuesday and Wednesday on the Fed's view of the economy.

Job creation in the United States has slowed dramatically in the last few months as employers worry about a sagging global economy hurt by Europe's snowballing debt crisis. Bernanke's peers at central banks in China, the euro zone and Britain have eased monetary policy this summer to prop up their economies.

The International Monetary Fund slashed its forecast for global economic growth on Monday and urged European policymakers to take bolder action to stem their crisis. It also warned that China's economy risks a hard landing.

The U.S. factory sector also has shown signs of contraction due to the global slowdown, although on Monday a survey showed New York state manufacturers perked up in July. Still, new orders shrank at the state's factories.

The retail data is worrisome because it suggests consumer spending, which drives about two-thirds of the economy, is also sagging.

"This is another example of how broader economic uncertainty is having an impact on economic activity," said Eric Fine, managing director of Van Eck G-175 strategies in New York.

JPMorgan economist Michael Feroli called the retail report "ugly across the board," lowering the firm's forecast for second-quarter economic growth to 1.4 percent from 1.7 percent.

The economy grew at a 1.9 percent annual rate in the first quarter.


Separately, a poll showed on Monday that American companies are scaling back plans to hire workers with a rising share of firms saying the European debt crisis is taking a bite out of their sales.

Forty-seven percent of companies surveyed felt their sales have dropped due to Europe's woes. Among companies that produce goods rather than provide services, the impact was even greater.

In a separate report, the Commerce Department said U.S. business inventories rose in May as motor vehicle dealers restocked to meet demand.

Demand, however, looked weak in June. The retail sales report showed receipts at motor vehicle and parts dealers dropped 0.6 percent last month.

Sales at electronics and appliance stores declined 0.8 percent, and were down 1.8 percent at gasoline stations, reflecting a decline in gasoline prices.

Often, relief at the pump allows consumers to spend their money elsewhere. But that didn't seem to be the case in June.

"The consumer is obviously struggling, not benefiting much from weak gasoline prices," said David Sloan, an economist at 4Cast in New York.

And gasoline prices might not continue to decline. So far in July, prices for crude oil have risen.

Consumers also face the prospect of higher taxes and less government spending next year, a combination that could potentially push the economy into recession.

Lawmakers are debating how to avoid this "fiscal cliff," which is built into current law. Democrats warned on Monday they are prepared to let all Bush-era tax cuts expire if Republicans insist on extending lower rates for top earners.

(Additional reporting by Leah Schnurr and Ryan Vlastelica in New York; Editing by Andrea Ricci and Neil Stempleman)

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Comments (13)
moxsee wrote:
So, do we sell the market due to consumer weakness or do we buy hoping for a Fed stimulus? You cannot have both.

Jul 16, 2012 8:57am EDT  --  Report as abuse
SeniorMoment wrote:
It is the little details that are holding back economic growth in the USA, such as under IRS rules, loan losses become taxable income to the the borrower who doesn’t pay back the whole loan. Another good example is that with interest rates paid by banks so low there is no strong reason to even bother moving money from checking to savings.

At least some institutions are also finding their continued business existence with existing staff is imperiled now not by loan losses, but simply by not enough borrowers. When a financial institution is paying less than 1% to depositors it is very hard to justify to potential customers the much higher rates banks and financial companies still charge for loans, and credit unions as well are not immune from this. People have now discovered that not all credit unions are made from the same cloth with interest paid and loan costs varying even while the average is higher interest on deposits and lower loan rates than average banks.

I don’t like it, but it may require as long as another six years, regardless of who is President for the U. S. Economy to return to steady growth. The discouragment of illegal immigrants has not helped either. Nearly all of them lived in some kind of housing, which is now vacant a lot more often, yet rents are rising because foreclosures unnecessaryily remove homes from both the market for homes and the rental market increasing the demand for rental properties excessively.

There is also a triple problem for retirees. Both companies a and governments, such as most severely, the State of Colorado, have not kept their commitments to their retirees, which suppresses their income, while their investments too are paying very liitle in dividends even though America’s best corporations have never had as much money in the bank before.

The worst is probably not over either. The longer a home remains underwater on its mortgage, the less likely the owners are going to continue to pay the mortgage, although high rental prices have temporarily dampened this urge, it will remain for up to ten years. After all credit is not impaired until you stop paying the mortgage after buying another home, and the resulting absence of credit can’t last longer than a decade. This makes it an especially easy move for those who are retired to make because social security, workers compensation, civil service, welfare benefits, and in a growing number of states all IRS recognized Pensions are exempt from garnishment claims.

Jul 16, 2012 9:20am EDT  --  Report as abuse
jscott418 wrote:
I would prefer Obama to still act like a President and address the economy instead of bashing Romney. Personally I see nothing wrong with Romney’s involvement with Bain. Its a company that bails out and re organizes troubled companies. These are companies already in big trouble. People do lose their jobs with these types of re oganizations. Quit fooling yourselves, if Bain did not get involved the company most likely with close down leaving everyone out of work.
Obama just has no clue how business works, so he attacks Romney. Does Obama not realize that over half small business fail? I am not a huge supporter of Romney, but what Obama is doing is petty,incorrect and does not address the fact that Bain saved a lot of companies!

Jul 16, 2012 9:48am EDT  --  Report as abuse
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