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Retail sales growth drops in June, signaling uncertainty

Many shoppers, worried about jobs and the economy, pulled back on spending in June, resulting in tepid sales for many retailers. On the bright side, retailers can welcome news that gas prices are down and home prices have begun to stabilize in most U.S. markets. At left, Shoppers trek Tuesday along Chicago’s Michigan Ave.

Associated Press

Many shoppers, worried about jobs and the economy, pulled back on spending in June, resulting in tepid sales for many retailers. On the bright side, retailers can welcome news that gas prices are down and home prices have begun to stabilize in most U.S. markets. At left, Shoppers trek Tuesday along Chicago’s Michigan Ave.

NEW YORK — Retailers could be sweating it out this summer.

Shoppers, worried about jobs and the economy, pulled back on spending in June, slowing sales for most retailers to the weakest pace since 2009. And that could leave merchants on edge, wondering if Americans will spend more when the back-to-school season starts late this month.

"The consumer is in a watch-and-wait mode," says Arnold Aronson, managing director of retail strategies at consulting firm Kurt Salmon.

The June results, based on revenue at stores opened at least a year, are considered an indicator of a retailer's health. Only a small group of chain stores report monthly sales figures. But the results offer a snapshot of consumer spending, which accounts for 70 percent of all economic activity.

For most, sales were disappointing. Big chains like Costco, Kohl's and Macy's, as well as teen retailer Wet Seal, were among stores whose results fell short of Wall Street expectations.

Shoppers are concerned about the struggling economy. Employers have pulled back on hiring. Europe faces a recession and growth has slowed in China. Worries about jobs sent shoppers' confidence down in June for the fourth straight month.

June is a period when stores clear out summer merchandise to make room for fall goods. So it is typically the second-biggest shopping month behind December. But because spending was so tepid last month and it took more discounts to get shoppers to buy, March may end up the bigger month, says Mike Niemira, chief economist at the International Council of Shopping Centers.

Overall sales growth was only 0.2 percent, according to the ICSC's tally of 23 stores nationwide. That was lower than the 1.7 percent increase in May, and it marked the weakest performance since November 2009, when the tally was down 0.2 percent.

Some temporary factors depressed June's retail results. The figures were compared with a hefty sale gain of 6.9 percent a year earlier, when results were the most robust for that month since 1999. Also, a series of storms left millions without power across a broad swath of the country.

Two trends could help shoppers feel wealthier and give retailers a boost during back-to-school sales, the second-biggest shopping period of the year after the holidays. Gas prices are down 60 cents since their peak of $3.94 in April, and home prices have begun to stabilize in most U.S. markets.

Against this backdrop, ICSC's Niemira expects a modest 2.5 percent increase in total back-to-school sales from mid July through mid September. If that happens, the result would be lower than last year's 3.6 percent increase and the 5.4 percent gain in 2010.

.Fast facts

More economic news

Here is a summary of other key economic reports released Thursday:

• U.S. service companies grew in June at the slowest pace in nearly 21/2 years, a troubling sign for the economy. But those same firms boosted hiring last month, adding to other data that show job growth may have picked up. The Institute for Supply Management said Thursday that its index of nonmanufacturing activity fell to 52.1 last month from a May reading of 53.7. Any reading above 50 indicates growth.

• Fewer people applied for U.S. unemployment benefits last week, offering some hope for the job market after three sluggish months of hiring. Weekly unemployment benefit applications dropped by 14,000 to a seasonally adjusted 374,000, the Labor Department said Thursday. That's the fewest since the week of May 19. The four-week average dipped by 1,500 to 385,750.

• Private-sector payrolls picked up in June, suggesting that the nation's unemployment may have declined, according to a report released Thursday by payrolls-processor Automatic Data Processing. According to ADP's data, private-sector payrolls rose 176,000 in June, led by small businesses and the service-providing sector. Economists had expected an increase of 100,000.

Times wires

Retail sales growth drops in June, signaling uncertainty 07/05/12 [Last modified: Thursday, July 5, 2012 9:30pm]
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