US Retail Sales Drop for Second Month, Indicating Waning Economic Recovery

Strategic Insights -

US retail sales declined by 0.5% in June, exceeding economists' projections and marking the second consecutive month of sales drops. This decrease is attributed to a lack of job growth and a decline in personal wealth, which accounts for 70% of the economy. As a result, shares of major retailers such as Target Corp. and Amazon.com Inc. have fallen, sparking concerns about consumer spending power. Despite a slight increase in inventory levels, businesses are bracing for slower growth as demand continues to wane.

Key Takeaways:

  • US retail sales dropped by 0.5% in June, a larger decline than the median forecast of economists surveyed by Bloomberg News.
  • Excluding auto dealers, demand fell by 0.1%, matching the median forecast.
  • Six of 13 major retail categories showed decreased demand in June, led by a 2.3% fall at auto dealers.
  • Vehicles sold at an 11.1 million annual pace in June, the fewest in four months.
  • Inventory levels rose by 0.1% in May from April, the smallest gain in 2010.
  • The consumer is losing momentum, with job gains not enough to bring down the unemployment rate, according to Harm Bandholz, chief US economist at UniCredit Group.
  • Retailers are bracing for slower growth, with firms starting to prepare for slackening demand.

Statistics:

  • US retail sales decreased by 0.5% in June.
  • Vehicles sold at an 11.1 million annual pace in June, the fewest in four months.
  • Inventory levels rose by 0.1% in May from April, the smallest gain in 2010.
  • Six of 13 major retail categories showed decreased demand in June.
  • The unemployment rate remains unchanged, despite job gains.
  • Consumer spending accounts for 70% of the economy.

Sources:

  • Bloomberg News
  • Commerce department figures
  • UniCredit Group
  • Toronto Star
  • REUTERS photo