Retail sales fall as consumers stay cautious

By Christopher S. Rugaber
AP Economics Writer

WASHINGTON (AP) - Americans cut back their spending at stores and restaurants last month, a sign that they remain cautious despite robust job growth in the past year.

Retail sales fell 0.3 percent in June, the Commerce Department said Tuesday, the weakest showing since February's harsh winter weather kept shoppers indoors. That followed a robust 1 percent jump in May, though that was revised down from a previous estimate of 1.2 percent.

Economists had expected that consumers would rein in their spending after May's large gain. But the reversal was much sharper than projected.

It suggests that consumers, still scarred by the Great Recession, are reluctant to spend freely even as unemployment has fallen and gas prices are about 90 cents a gallon cheaper than a year earlier.

Excluding autos, gas, building materials and restaurants, so-called core retail sales - which factor into the government's official measure of economic growth - fell 0.1 percent in June, after an increase of 0.7 percent in May.

Spending at restaurants and bars, an area of strength in recent months, slipped 0.2 percent. Sales of building materials fell 1.3 percent. Online and catalog retailers reported a 0.4 percent drop in sales.

Sales at auto dealers fell 1.1 percent, but that drop came after a big gain in the previous month. Auto purchases reached the highest level in a decade in May, so even with the decline, sales remain at a healthy level.

Economists watch the retail sales report closely because it provides the first indication each month of the willingness of Americans to spend. Consumer spending drives 70 percent of the economy. Yet retail sales account for only about one-third of spending, with services such as haircuts and Internet access making up the other two-thirds.

Despite June's weak showing, there is evidence that consumers are growing more confident and may spend at a healthy pace for most of the rest of this year.

The Conference Board's consumer confidence index jumped in June to its second-highest level since the recession ended in June 2009. It is now 17.4 percent higher than a year ago.

And Americans are borrowing more: Consumer credit, which includes auto, student and credit card loans and excludes mortgages, rose a healthy 6.5 percent in May from a year earlier.

Overall consumer spending surged in May, the Commerce Department said last month. It jumped 0.9 percent, the most in nearly six years, as income rose and Americans saved less.

Published: Wed, Jul 15, 2015

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