June retail sales near flat, but experts upbeat

Chrysler posted solid gains in June U.S. auto

Chrysler posted solid gains in June U.S. auto sales as analysts forecast a strong close to the first half of the year and more growth in the months to come. Americans spent more at retail businesses in June, although the gain was heavily driven by auto sales and higher gas prices. (Jan.10, 2012) (Credit: Getty Images)

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The U.S. economy appears to be weaker than many economists had thought after a report Monday showed consumers spent cautiously in June at retail businesses.

Americans bought more cars and trucks, furniture and clothes. But they cut back almost everywhere else. They spent less at restaurants and bars, reduced purchases at home improvement stores, and bought fewer computers and electronics.

Overall retail spending rose 0.4 percent in June from May, the Commerce Department said. But excluding volatile spending on autos, gasoline and building supplies, so-called core retail sales rose just 0.15 percent. That's the weakest gain since January.

Economists said the deceleration in retail sales could slow economic growth in the April-June quarter to an annual rate below 1 percent. That's weaker than many had thought and would be down from a tepid 1.8 percent rate in the January-March quarter.

Still, many economists aren't changing their forecast for the second half of the year. Most expect growth will rebound to around a 2.5 percent rate.

"Job growth, income growth, rising stock prices and higher home prices all suggest a healthier state for the household sector in the second half of the year," said Paul Dales, chief U.S. economist at Capital Economics.

Consumers are still increasing their spending. But the pace has dropped off sharply from the start of the year. Core retail sales increased from April through June at a 2.7 percent annual rate. That's down from a 4.2 percent rate during the first three months of the year.

The decline suggests an increase in Social Security taxes that took effect Jan. 1 may be starting to squeeze consumers.

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