Retail sales decline 0.2% in June

Spending dips at restaurants, department stores, gas stations

Best Buy employees work on a display at a store in Cary, N.C., in May. One economist called Friday’s report on slipping retail sales “a disappointment as far as the resilience of the consumer is concerned.”
Best Buy employees work on a display at a store in Cary, N.C., in May. One economist called Friday’s report on slipping retail sales “a disappointment as far as the resilience of the consumer is concerned.”

WASHINGTON -- Americans curtailed their shopping in June, with less spending at restaurants, department stores and gasoline stations.

The spending pullback came despite a healthy job market and suggests sluggish economic growth, economists said.

Retail sales fell 0.2 percent last month after declining 0.1 percent in May, the Commerce Department said Friday. Spending at retailers has grown 2.8 percent over the past 12 months, a relatively modest pace given that the sales figures aren't adjusted for inflation.

Michael Dolega, a senior economist at TD Bank, called the report "a disappointment as far as the resilience of the consumer is concerned."

The decline reflects in part a transformative shift by consumers toward Amazon and other online retailers. Sales at department stores have dwindled. The rise of online shopping has left more retailers competing on price or striving to offer deeper discounts -- factors that can limit overall sales figures.

Even former sources of strength in retail, such as restaurants and auto dealers, have faced weakening sales in recent months.

The spending figures are closely watched because consumers account for roughly 70 percent of U.S. economic activity. If their spending slows, it can drag down growth across the broader economy.

The economy has expanded at a tepid annual pace of roughly 2 percent since the recession ended eight years ago. President Donald Trump has pledged to elevate that rate above 3 percent. But some economists say it's doubtful he can do so without a jolt in retail spending that would reflect greater consumer confidence and sustained income gains.

Sales slipped 0.6 percent at restaurants and bars in June. They fell 0.7 percent at department stores and 1.3 percent at service stations, likely because of lower gasoline prices.

But not all sectors suffered declines in June. Spending improved 0.4 percent at nonstore retailers, a category that includes online outlets. Building materials stores enjoyed a 0.5 percent increase in sales. Auto dealers and furniture stores also reported slight gains of 0.1 percent.

Despite the slight improvement of sales by auto dealers, overall motor vehicle sales, which can include purchases by rental car companies, fell 3 percent in June.

While economists projected a slight increase, consumer prices were little changed in June and held back by cheaper home furnishings, cars and clothing. Households also enjoyed modestly priced airfare and hotel stays at the start of the summer, Labor Department data showed Friday.

The unchanged consumer price index reading followed a drop of 0.1 percent in May, the Labor Department said. Inflation has climbed just 1.6 percent from a year ago. That's down sharply from February, when prices rose 2.7 percent from a year earlier.

Excluding the volatile food and energy categories, prices rose 0.1 percent in June and 1.7 percent from a year earlier.

The discounts on merchandise may partly explain why the Commerce Department's data on retail sales, which aren't adjusted for prices, unexpectedly decreased for a second month.

"Consumers are cautious to spend despite the positive backdrop of upbeat job gains, rising -- albeit sluggish -- wage growth and low interest rates," Gregory Daco, chief U.S. economist at Oxford Economics, wrote in a research note. "Weak consumer spending in June means that momentum heading into the third quarter is fairly soft."

Evaporating consumer optimism suggests moderation at the cash register as well. Sentiment weakened in early July to a nine-month low, according to figures released Friday from the University of Michigan. The latest decline shows postelection buoyancy has been erased amid Washington gridlock around health care and tax legislation.

Information for this article was contributed by Josh Boak and Christopher S. Rugaber of The Associated Press and by Michelle Jamrisko of Bloomberg News.

Business on 07/15/2017

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