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U.S. economy appears weaker as retail sales slump

Americans cut their spending at retail businesses for a third straight month in June, as a weak job market made consumers more cautious. Retail sales fell 0.5 percent from May to June, the Commerce Department said Monday.

Associated Press

Americans cut their spending at retail businesses for a third straight month in June, as a weak job market made consumers more cautious. Retail sales fell 0.5 percent from May to June, the Commerce Department said Monday.

WASHINGTON — The outlook for the U.S. economy appeared dimmer Monday after a report that Americans 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 released on the same day that the International Monetary Fund slightly lowered its outlook for global growth over the next two years.

"However hard you look, there's just no good news in this report," said Paul Ashworth, chief U.S. economist at Capital Economics.

Weakening retail spending could make the Federal Reserve more likely to act further to try to encourage more borrowing and spending by lowering long-term interest rates. The Fed's policy committee will meet at the end of this month.

Most economists don't expect new Fed action after that meeting. But some said Monday's Commerce report, coming after three straight months of tepid hiring, makes some Fed action more likely by year's end.

Ashworth said economic growth likely slowed to an annual rate of just 1.5 percent in the second quarter. That isn't enough to lower high unemployment. The U.S. unemployment rate is 8.2 percent.

In Monday's report, Commerce also said Americans spent less in April than previously thought. In part because of that, Michael Feroli, an economist at JPMorgan Chase, lowered his estimate of growth in the April-June quarter from a 1.7 percent annual rate to a 1.4 percent rate. And he lowered his forecast for the July-September quarter to a 1.5 percent growth rate, down from a 2 percent rate.

The IMF lowered its outlook for global growth over the next two years in part because of Europe's financial crisis and slower expansion in China and India.

The international lending organization predicts global growth of 3.5 percent this year, down from its forecast in April of 3.6 percent. It cut its forecast for 2013 to 3.9 percent growth from 4.1 percent.

The IMF also cut its forecast for U.S. growth to 2 percent this year and 2.3 percent next year, both slightly below its previous estimates.

Inventories grow

U.S. companies added to their stockpiles in May, but their sales fell for a second straight month. Business inventories grew 0.3 percent in May from April, matching April's increase, the Commerce Department reported Monday. Total business sales fell 0.1 percent in May, matching the April decline. Total stockpiles rose to $1.58 trillion in May. That's nearly 20 percent higher than the low point in September 2009, shortly after the recession ended.

U.S. economy appears weaker as retail sales slump 07/16/12 [Last modified: Monday, July 16, 2012 8:13pm]
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