Overall retail sales were up in July, led by auto and gas industries

WASHINGTON

Americans spent less at most retail stores in July, but it was a busy month for car dealerships, and higher gas prices lifted overall retail sales 0.4 percent last month, the Commerce Department said Friday. It was the first gain in three months.

Excluding auto and gasoline sales — which accounted for one-fourth of the July figures — retail sales fell 0.1 percent last month. Sales were down 1 percent at department stores and also dropped at specialty clothing stores, furniture stores, hardware stores and appliance stores.

"While retailers have seen a solid gain in activity compared to last year, the more recent three-month trend has been negative, and that is not good news," said Joel Naroff, president of Naroff Economic Advisors.

"There is only one thing that's for sure — economic momentum has slowed," said Jennifer Lee, senior economist for BMO Capital Markets.

The July increase in retail sales followed declines of 0.3 percent in June and 1 percent in May. Sales had surged 2.1 percent in March. But since then, they have weakened.

Summer promotions and easier credit lured shoppers back to car buying last month. Nissan, Toyota, Volks­wagen, Subaru and Kia reported the biggest gains. The industry sold more than 1 million cars and light trucks. That's 5.1 percent higher than in July 2009. Last year, auto sales fell to the lowest level in three decades.

Some major department store chains reported solid second-quarter earnings this week. But executives see economic uncertainty in the months ahead.

"Consumer constriction of credit, the job-loss situation and the protracted housing situation has had the biggest impact on the middle-income consumer," said Myron Ullman III, chairman and chief executive of J.C. Penney Co.

Economists will be studying earnings reports from Wal-Mart Stores Inc., the world's largest retailer, and Target Corp. to get an even better read of consumers' financial health. Both report next week.

In the July retail sales report, sales at gasoline stations rose 2.3 percent, the biggest jump since November. But much of that strength reflected higher prices.

Prices are rising at the slowest pace in 44 years, well below the Federal Reserve's inflation target.

July's modest increase in consumer prices may quiet deflation concerns raised in recent weeks by some Federal Reserve officials. Deflation is a widespread and prolonged drop in the price of goods, real estate and stocks. It also reduces wages and can make it harder to pay off debts.

The last serious case of deflation in the United States occurred during the Great Depression. Most economists don't believe deflation will happen.

Prices edge higher

A rise in the cost of gas drove consumer prices up last month by the most in nearly a year, but overall inflation remained tame. The Consumer Price Index, the government's most closely watched inflation measure, increased 0.3 percent in July, the Labor Department said. That followed three months of declines. Pushing the index up was a 4.6 percent increase in the price of gas. Excluding volatile food and energy prices, the so-called core price index increased 0.1 percent in July. Over the past year, core consumer prices rose 0.9 percent.

Overall retail sales were up in July, led by auto and gas industries 08/13/10 [Last modified: Friday, August 13, 2010 9:35pm]

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