U.S. Economy Appears Weaker as Retail Sales Slump

Retail Stores
WASHINGTON -- The outlook for the U.S. economy appeared dimmer Monday after a report that Americans spent less at retail businesses for a third straight month in June.

The report led some economists to downgrade their estimates for economic growth in the April-June quarter. Many now think the economy grew even less than in the first quarter of the year, when it expanded at a sluggish 1.9% annual rate.

Spending in June fell in nearly every major category -- from autos, furniture and appliances to building, garden supplies and department stores. Overall, retail sales slid 0.5% from May to June, the Commerce Department said.

Retail sales hadn't fallen for three straight months since the fall of 2008, at the height of the financial crisis.

Stocks fell after the report was released. The Dow Jones industrial average sank 74 points in early trading. Broader indexes also declined.

"However hard you look, there's just no good news in this report at all," said Paul Ashworth, chief U.S. economist at Capital Economics.

Sales were still 4.7% higher in the April-June period than in the second quarter of 2011. And retail sales don't include spending on services, which represents a larger portion of the economy.

Still, Ashworth said overall economic growth likely slowed to an annual rate of just 1.5% in the second quarter. That's isn't not enough to lower high unemployment. The U.S. unemployment rate is 8.2%.

Some of the weakness in recent months reflects falling gas prices. But even excluding sales at gas stations, retail spending fell 0.3% in June from May.

Consumers have grown less confident in the economy this spring. Hiring has slumped and wages have barely kept pace with inflation, keeping budgets tight. As a result, consumers have pulled back sharply on their spending, which drives 70% of economic activity.

"Recent weak jobs data have certainly done nothing to alter our view that consumer spending growth will be very modest at best in the quarters ahead," said Joshua Shapiro, chief U.S. economist at MFR, Inc. "A silver lining in the economic clouds is that lower gasoline prices are helping to cushion the consumer."

Other reports Monday were mixed.

Factory activity in the New York region is growing at a slightly faster pace this month, according to a survey. The Federal Reserve Bank of New York said its Empire State manufacturing index increased to 7.4 in July from a reading of 2.3 in June. Any number above zero indicates growth.


The International Monetary Fund slightly lowered its outlook for global growth over the next two years. Europe's financial crisis and slower expansion in China and India have weakened the world economy.

The IMF predicts global growth of just 3.5% this year, down from its forecast of 3.6% in April. It says the U.S. will grow just 2%.

The retail spending report showed sales at auto dealers -- one of the economy's strongest areas this year -- fell 0.6% in June compared to May. That's a gloomier assessment of the industry than earlier reports from automakers.

The automakers said sales increased 22% in June from the same month in 2011. However, they do not adjust their sales data for seasonal changes. And their data only reflect changes compared to the same month in the previous year.

The weakness in June went well beyond auto sales. The government report showed sales fell 0.7% at department stores and declined 1.6% at building supply stores. Sales at furniture stores and electronics and appliance stores both fell 0.8%.

Sales at gas stations declined 1.8% after a 2% drop in May. The declines reflected lower gas prices, which are down more than 50 cents since early April.

The economy is expanding too slowly to lower the unemployment rate, which stayed at 8.2% in June.

Employers have created an average of just 75,000 jobs a month in the April-June quarter -- a third of the monthly job growth during the previous three months.

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rhobbel

You only have to listen to Obama to know none of this is true. He claims we are on the road to recovery and he always tells the truth! His people are still claiming his is the most transparent presidency. All's we have to do is keep believing in our POTUS and all will be well.

July 17 2012 at 12:04 PM Report abuse +1 rate up rate down Reply
George

Darn fooled me again. with the non-working prez touring the country side I thought he was telling everyone about those jobs he has created which should mean $$ spent. guess that was another one of the lies!!
PS he couldn't take the heat for another tax payer screwin' by taking an official vacation with the tribe so he's doing a bus vacation since it isn't work!!

July 17 2012 at 11:25 AM Report abuse rate up rate down Reply
miamiprep

It's Bush's fault!!!

July 17 2012 at 10:51 AM Report abuse rate up rate down Reply
Bankcard

Just remember, "The Private Sector is fine" Four more years of Obama and we will all need food stamps.

July 17 2012 at 10:14 AM Report abuse rate up rate down Reply
pugidmd

So much for Keynesian economics.

July 17 2012 at 10:04 AM Report abuse +2 rate up rate down Reply
papadon.don

What else is there to buy?? after electric bills... groceries... health insurance...taxes... mortgage or rent... gasoline... we have no money remaining to blow for retail luxuries.

July 17 2012 at 9:53 AM Report abuse +1 rate up rate down Reply
ken herman

The Democrat parties plan is to get at least 51% of the population on food stamps, entitlements, and free hand outs and they'll be very hard to beat in November, and checking the poles they're real close.

July 17 2012 at 9:34 AM Report abuse +2 rate up rate down Reply
1 reply to ken herman's comment
Jose

KEN, THE LOWER 50 % OF AMERICANS ARE POOR. BLAME THE FREE TRADE AGREEMENTS. OUTSOURCING OF THE JOBS IS AMERICA # 1 KILLER.
THERE ARE MANY ON WELFARE, BUT THOSE PEOPLE JOBS GOT OUTSOURCE TO CHINA. MANY ARE TOO OLD TO START OVER AGAIN. NO PENSIONS AND NO JOB SKILLS.

THE LOWER 50 % OF AMERICANS ARE DOOMED--POOR---NO HOPE OF A PENSION----TOO OLD TO GET REHIRE AGAIN AND HOPELESS. I SEE IT EVERYDAY ...

July 17 2012 at 9:55 AM Report abuse -2 rate up rate down Reply
mccglf

Three months of retail sales declines are a sign of impending recession. Let's raise taxes and make it a sure thing!

July 17 2012 at 9:33 AM Report abuse +2 rate up rate down Reply
Jose

AMERICA ECONOMY IS GOING NO WHERE UNTIL WE END ALL THE JOB OUTSOURCING.
END ALL LEGAL IMMIGRATION, DO WE NEED MORE PEOPLE IN AMERICA WITH MILLIONS UNEMPLOYED ???? DUH.

MEXICO BORDER MUST BE 100 % SECURE WITH CHEAP PAID U.S. TROOPS. IT WILL COST A LOT LESS IF AMERICAN TROOPS GUARD THE MEXICO BORDER..

BORDER AGENTS ? MANY ARE MEXICANS WHICH I DO NOT TRUST THEM TO BE 100 % LOYAL TO THE U.S. REPLACE ALL BORDER AGENTS WITH AMERICAN TROOPS.

MAKE E-VERIFY THE LAW OF THE LAND. STRICTLY ENFORCE WITH UP TO 5 YEARS IN JAIL FOR HIRING ILLEGALS AND FINES OF UP TO $ 10,000 THOUSANDS PER ILLEGAL THEY HIRE.

WHEN ALL THAT IS DONE ?? AMERICA ECONOMY WILL COME BACK.

July 17 2012 at 9:32 AM Report abuse +2 rate up rate down Reply
kafienkarl

Some people think two war(s), MEDiCARE D and the Bush Tax Cuts were inexpensive. All three of them are very very very expensive and big government. They part of the reasons we are where we are today. Look up the cost of MEDiCARE D. Then look up the cost of the Bush Tax Cuts to FINANCE. Yes finance.

July 17 2012 at 9:24 AM Report abuse rate up rate down Reply
1 reply to kafienkarl's comment
papadon.don

Medicare D debauchery... some $1.2 trillion to PARTIALLY insure 15% sr's without Rx coverage.

ObamaCare debauchery... $2.6 trillion to insure a willing 20 million ... the other 15 million won't participate nor pay the Tax.

Fighting 3 wars without funding is another debauchery.

Two years of unemployment bennies is unsustainable.

Federal employees at all time high....and growing!!!

All this--and MORE--- without major tax hikes...... PRICELESS!!!

July 17 2012 at 9:45 AM Report abuse +2 rate up rate down Reply