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Struggling labor market cited in stagnant August retail sales

WASHINGTON — Retail sales unexpectedly stagnated in August as a lack of jobs restrained shoppers, highlighting the risk the economy will stall.

The unchanged reading follows a 0.3 percent gain for July that was smaller than previously estimated, Commerce Department figures showed Wednesday. Chains like Best Buy and Target say a struggling labor market that's battered confidence is hurting sales.

"Consumers are being more cautious given all the economic headwinds," said Michael Feroli, chief U.S. economist at JPMorgan Chase in New York. "Policymakers have to be focused on growth, because growth seems to have come close to stalling in August."

Purchases at automobile dealers dropped 0.3 percent after rising 0.2 percent in July, Wednesday's report showed, while purchases excluding autos increased 0.1 percent.

Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales were unchanged, the weakest performance this year, after a 0.3 percent increase in July.

Spending on big-ticket items such as cars and appliances is threatened by a lack of job creation. Payrolls in the world's largest economy stagnated last month and unemployment held at 9.1 percent, Labor Department figures showed this month.

The risk of a broader pullback in the economy has increased pressure on the Fed, Obama administration and Congress to step up efforts to spur the economy.

A plan from President Barack Obama, announced before a joint session of Congress on Sept. 8, called for an extension of a payroll-tax break for Americans and unemployment assistance. He also pushed for a payroll tax break for small businesses, an increase in infrastructure spending and more aid for state governments.

Best Buy, the world's largest consumer electronics retailer, cut its full-year earnings forecast Tuesday, reporting a 30 percent decline in second-quarter profit.

Sales gains at Target, the second-largest U.S. discount retailer, are "a bit more challenging" than expected at the beginning of the year, Douglas Scovanner, chief financial officer, said on Sept. 8.

Meanwhile, J.C. Penney Co., like other retailers, is seeing less mall traffic and more cautious consumer spending on non-essential products, chief executive Myron Ullman said.

More economic reports

• U.S. companies paid the same amount for wholesale goods last month as a drop in energy prices offset higher food costs, the Labor Department said Wednesday. Excluding the volatile food and energy categories, core wholesale prices edged up 0.1 percent, the smallest increase in three months. The figures indicate that inflation pressures are easing.

• Businesses added to their stockpiles in July for a 19th straight month and their sales increased by the most since March. The Commerce Department said business inventories rose 0.4 percent in July following a similar gain in June. Business sales increased 0.7 percent in July. The strong month for inventory growth shows businesses were confident in the economy despite weakening growth and dismal spending by consumers in the first half of the year.

Associated Press

Struggling labor market cited in stagnant August retail sales 09/14/11 [Last modified: Wednesday, September 14, 2011 8:58pm]
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