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Second straight month of dim retail sales hurt economy

WASHINGTON - A second straight month of declining retail spending may keep unemployment high and help weaken the recovery.

Not everyone is suffering, but Americans are spending less, and that threatens the pace of recovery.

"Clearly, the consumer is being more cautious now," said David Wyss, chief economist at Standard & Poor's in Manhattan.

Consumer spending, which accounts for 70 percent of economic activity, grew at a solid rate during the first three months of the year. But consumers - worried about unemployment rates, the stock market and housing sector - have since held back in the past two months.

Retail sales revenue fell 0.5 percent in June, the Commerce Department reported yesterday. That followed a 1.1 percent fall in May. Pulling down the overall June figures was a drop in auto sales and declining gas prices. Excluding those volatile categories, sales ticked upward slightly for the month.

June's disappointing retail sales figures also come as businesses are slowing their pace of restocking their shelves. The Commerce Department said Thursday that business inventories rose 0.1 percent in May. But sales dropped 0.9 percent, the first decline since March 2009.

Businesses helped drive the early stages of the recovery last year by replenishing their supplies. The worry is that if consumer demand falters, businesses will cut back on supplies. That could mean fewer orders to U.S. factories and weaker output from manufacturers. - AP

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