Retail sales up slightly in June after May drop

AP News
Posted: Jul 14, 2011 11:34 AM
Retail sales up slightly in June after May drop

Consumers spent more on cars and in big chain stores in June but falling gas prices held back retail sales.

Retail sales rose a modest 0.1 percent last month, the Commerce Department said Thursday. That follows a 0.1 percent decrease in May, which was the first decline after 10 straight gains.

When excluding autos, retail sales were flat in June. A rebound from spring supply disruptions stemming from the Japan crises helped pushed auto sales up 0.8 percent.

Sales at general merchandise stores, which include stores such as Wal-Mart and Target, rose 0.4 percent.

Falling gas prices pushed station sales down 1.3 percent. But consumers are still paying nearly a dollar more for gas than they did a year ago.

Retail sales have been slowing since February. Consumers are being more cautious about spending because of the higher gas prices and a sluggish job market.

"Clearly the recent stalling in employment growth has forced households to be a bit more careful with their cash," said Paul Dales, senior U.S. economist with Capital Economics.

The economy added just 18,000 jobs last month, the fewest in nine months. The unemployment rate rose to 9.2 percent, the highest rate this year.

Analysts forecast that the economy will regain momentum in the second half of this year if gasoline prices moderate.

Gas prices have dropped since peaking in early May at a national average of nearly $4 per gallon.

A decline in gas prices means consumers have a little more money to spend on discretionary items. But prices are still high compared with last year. On Wednesday, motorists paid roughly $3.65 per gallon, according to AAA. That's 93 cents more than the same period a year ago.

There were some positive signs in June. Big retailers posted strong sales last month. Warm weather and deep discounts drew consumers to chain stores. The International Council of Shopping Centers said retailers collectively enjoyed their best June in 12 years, based on a survey of 28 store chains. The figures are based on revenue at stores open at least a year.

Falling gas prices also gave a small boost to American car sales. General Motors and Ford have relied on truck sales but now have strong line-ups of smaller, fuel-efficient models as well. Toyota and Honda did not fare as well. They ran short of cars because of ongoing problems from the Japanese natural disasters.

Auto sales aren't expected to consistently pick back up until fall, when Japanese production is at full capacity.

Consumer spending is closely watched because it accounts for 70 percent of economic activity. The economy expanded at an annual rate of 1.8 percent in the January-March period, and most economists don't expect growth to be much stronger in the April-June quarter. The jump in energy prices has mostly offset the positive impact of a reduction in Social Security payroll taxes.