Retail slump dims outlook
WASHINGTON (AP) -- The outlook for the U.S. economy appeared dimmer Mon day after a report that Ameri cans 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 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 announced on the same day that the Inter national Monetary Fund slightly lowered its outlook for global growth over the next two years.
Stocks fell after the Com merce report was released. The Dow Jones industrial average sank 74 points in early trading. Broader indexes also declined. Later in the morning, stocks regained some of their losses.
"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.
Weakening retail spending could make the Federal Reserve more likely to take further steps to try to lower long-term interest rates to encourage more borrowing and spending. The Fed’s policy committee will meet at the end of this month.
Most economists don’t expect the Fed to announce new action after that meeting. But some said Monday’s Commerce report, coming after three straight months of tepid hiring, makes Fed action more likely before year’s end.
Retail sales were still 4.7 percent 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 percent in the second quarter. That’s isn’t enough to lower high unemployment. The U.S. unemployment rate is 8.2 percent.