Retail Sales Plunge By The Largest Amount In Nearly 2 Years
Friday, July 13th 2007, 9:00 am
By: News On 6
WASHINGTON (AP) _ Consumers put away their wallets in June, sending retail sales crashing by the sharpest amount in nearly two years.
The Commerce Department reported Friday that retail sales fell by 0.9 percent last month, the biggest drop since August 2005. Demand for autos, furniture and building supplies all plunged.
The drop was much bigger than the flat reading that economists had been expecting. It raised new worries about consumer spending, which is closely watched because it accounts for two-thirds of total economic activity.
The government report followed news Thursday of mixed results among the nation's big retail chains. While some stores fell below expectations, Wal-Mart Stores Inc., the world's largest retailer, posted better-than-expected results, which sent the stock market surging on the hopes that the consumer will be able to offset the impact of a slumping housing market.
Economists still believe that the economy is rebounding after a lackluster start to the year. They are predicting that overall growth, as measured by the gross domestic product, will come in at a rate of 3 percent or better in the just completed April-to-June quarter.
That would be a significant improvement over the dismal 0.7 percent growth rate in the first three months of the year, the weakest performance in more than four years.
However, if the consumer falters, those optimistic forecasts could be called into question. Analysts are worried that a relentless rise in gasoline prices and a slumping housing market could trigger a slowdown in spending.
The RBC Cash Index released Friday showed that consumer confidence slid in early July to 76.1, the lowest reading since last August.
The 0.9 percent drop in June sales reflected a 2.9 percent fall in sales of autos and auto parts as Detroit continues to struggle with slumping demand for its sport utility vehicles in the face of rising gasoline prices.
In a sign of the weakness in the housing market, sales at furniture stores were down 3 percent last month, the biggest setback since February 2003, and sales at hardware stores fell by 2.3 percent.
Sales at specialty clothing stores fell by 1.4 percent while department stores saw sales fell by 1 percent. A broader category which includes such traditional department stores and big chains such as Wal-Mart posted an increase of 0.3 percent in June.
Sales at gasoline service stations dropped by 1.1 percent, a decline that was attributed to a temporary fall in gasoline prices during the month.
Excluding the big decline in auto sales, retail sales would still have been weak, falling by 0.4 percent, the poorest showing in this category since last September.