Retail sales fall for 3rd straight month

Article by: MARTIN CRUTSINGER and ANNE D'INNOCENZIO ASSOCIATED PRESS
Updated: July 16, 2012 - 8:16 PM

The question now is whether the Fed will take further steps to try to inject more life into the economy.

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This might be a window into the struggling economy at an Atlanta Lowe’s. Consumers spent less on furniture, appliances, building and garden supplies and other items from department stores.

Photo: David Goldman, Associated Press

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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 estimates for economic growth in the April-June quarter. Many now think the economy grew even less than in the first quarter, when it expanded at a sluggish 1.9 percent 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 percent 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.

The weak U.S. spending figures were released on the same day the International Monetary Fund slightly lowered its outlook for global growth over the next two years.

Stocks fell after the Commerce report was issued. The Dow Jones industrial average sank 74 points in early trading. Broader indexes also declined. Later, stocks regained some of their losses.

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

Weakening retail spending could make the Federal Reserve more likely to act further to try to encourage more borrowing and spending by lowering long-term interest rates. The Fed's policy committee meets at the end of this month.

Most economists don't expect Fed action after that meeting. But some said Monday's Commerce report makes some action more likely by year's end.

But through June, retail sales were still 4.7 percent higher in the second quarter than in the same period in 2011. And figures don't include spending on services, which makes up about two-thirds of consumer purchases.

Spending figures for services aren't yet available for June. But consumers have spent more on services each month this year.

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