July 17, 2012 in Business

Retail sales continue slump

Third straight decline puts damper on outlook
Associated Press
 
Fed boss to testify

Fed Chairman Ben Bernanke will testify to Congress about the economy today and Wednesday.

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 fall 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.

Stocks fell after the Commerce report was issued. The Dow Jones industrial average sank 74 points in early trading. Broader indexes also declined. Later in the day, stocks regained some of their losses.

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

In Monday’s report, Commerce also said Americans spent less in April than previously thought.

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.

Despite the lackluster spending in April through June, retail sales were still 4.7 percent higher in the second quarter than in the same period in 2011. And the figures don’t include spending on services, which makes up about two-thirds of consumer purchases.

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.

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