Retail Sales and Unemployment Claims Disappoint
The Commerce Dept. said advance estimates of July retail sales declined 0.1%—falling short of consensus estimates of a 0.6% gain. It was the first decline in retail sales following two months of modest gains. Economists had hoped for a strong boost in auto sales driven by the popular "Cash for Clunkers" rebate, and indeed auto sales gained 2.4%, the biggest increase in six months. But excluding auto sales, retail sales dropped 0.6%—suggesting that consumers may have put off other purchases to take advantage of auto deals.
"Cash for Clunkers pried open consumer wallets a bit, but at the expense of spending on other items," Michael Gregory, senior economist at BMO Capital Markets, wrote in a research note. "This suggests that U.S. consumers remain in a funk, reflecting continuing (albeit lessening) job losses. And, with consumer spending accounting for 70% of the U.S. economy, clouds remain over the pace of economic recovery."
Consumers Hard-Pressed The new numbers come just a day after the Federal Reserve suggested in its policy statement that the downturn in economic activity was "leveling out," and gives further weight to suggestions that consumer spending will be hard-pressed to contribute to anything more than a sluggish recovery from recession.
But consumers may not be ready to spend until they see an upturn in the jobs picture—and Thursday's jobs numbers were no encouragement. The Labor Dept. said initial unemployment claims increased to 558,000 for the week ending Aug. 8, an increase of 4,000 from the previous week's revised figure of 554,000. Economists surveyed by Thomson Reuters (TRI) had expected jobless claims to fall to 545,000.
The latest numbers "support other evidence" that the U.S. job market has improved but still "remains unusually weak," wrote Paul Dales, U.S. economist at Capital Economics.