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Posted: Tuesday, July 15th 2014 at 9:23am

Retail sales tick up just 0.2 percent in June

By The Associated Press
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WASHINGTON (AP) -- U.S. retail sales increased slightly in June, evidence that consumers remain cautious despite steady job gains this year.

Retail sales rose just 0.2 percent last month, the Commerce Department said Tuesday, held back by a sharp drop at building materials and garden supply stores. Sales also fell at restaurants and at auto dealers.

The figures suggest that Americans are reluctant to spend freely, which could slow growth in the April-June quarter. While employers have stepped up hiring since January, wage growth remains weak and is barely keeping up with inflation. Retail sales are closely watched because consumer spending accounts for 70 percent of the economy.

Still, there were some good signs: A measure of retail sales that excludes volatile categories such as gasoline and autos rose at a solid 0.6 percent clip. Clothing stores, sporting goods stores and department stores all recorded sales gains. And a category that includes online and catalog retailers jumped 0.9 percent in June and has increased 8.1 percent in the past 12 months. That's nearly double the 4.3 percent growth in overall retail sales in the past year.

Sales at auto dealers fell 0.3 percent, which contradicts strong data released by the automakers themselves earlier this month. The automakers had said sales reached an eight-year high in June. The two sets of data can sometimes conflict on a month-to-month basis.

Retail sales were revised higher in May to 0.5 percent from 0.3 percent, and in April to 0.6 percent from 0.5 percent.

The data may raise concerns that the economy did not bounce back in the April-June quarter as strongly as many analysts hoped. The economy shrank 2.9 percent at an annual rate in the first three months of the year, largely because of cold weather.

Many economists have already cut their forecasts for the second quarter because they don't expect consumers to spend at a healthy pace. According to a survey by the National Association for Business Economics, analysts now forecast growth of 3 percent at an annual rate. That's down from a forecast of 3.5 percent a month earlier.

The economists surveyed expect consumer spending will grow at just a 2.3 percent pace in the April-June quarter, down from their June forecast of 2.9 percent. Spending rose just 1 percent in the first quarter, the smallest increase in four years.

Several retailers have reported disappointing sales in the past month. Family Dollar, the Container Store and the Gap have all blamed falling sales on consumer caution. The CEO of the Container Store said the chain has been hurt by a "retail funk."

Yet some other stores reported healthy sales gains, including the discount club chain Costco and grocery chain Kroger's.

Purchases of large items like autos may be leaving many Americans with less money to spend on discretionary items like clothes and electronics. Rising grocery prices have likely also squeezed household budgets.

Still, employers are hiring at a healthy pace, which may give Americans more confidence to spend. Employers have added an average of 230,000 jobs a month in the first half of this year, up from 194,000 a month in 2013. That's knocked the unemployment rate down to 6.1 percent, the lowest in nearly six years.
Associated Categories: National News, Business News, Local/State News

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