Bloomberg News

Retail Purchases in U.S. Unexpectedly Decrease 0.5%

July 16, 2012

Retail Purchases in U.S. Unexpectedly Decreased 0.5% in June

An inflatable eagle advertises "below invoice pricing" at the Rick Perry Buick GMC dealership in La Salle, Illinois. Photographer: Daniel Acker/Bloomberg

Retail sales in the U.S. unexpectedly fell for a third month in June as limited employment gains took a toll on consumers.

The 0.5 percent drop followed a 0.2 percent decrease in May, Commerce Department figures showed today in Washington. The decline exceeded the most pessimistic forecast in a Bloomberg News survey that called for a median 0.2 percent gain in sales. Other reports today showed manufacturing in the New York region picked up this month and U.S. inventories increased in May.

The retail figures prompted economists at Morgan Stanley, Goldman Sachs Group Inc. and Credit Suisse to lower their forecasts for economic growth in the second quarter. A cooling job market is sapping the household spending that makes up 70 percent of the economy, curbing sales at retailers such as Target Corp. (TGT:US) and Macy’s Inc. (M:US)

“Weak spending growth and weak employment are reinforcing one another in a disconcerting negative feedback loop,” said Jay Feldman, a director of U.S. economics at Credit Suisse in New York, who cut his tracking estimate for second-quarter economic growth to 1.6 percent from 2 percent.

Stocks trimmed losses as a rally in crude oil prices boosted shares of energy producers. The Standard & Poor’s 500 Index fell 0.2 percent to 1,353.64 at the close in New York. The yield on the 10-year Treasury note slid to 1.47 percent from 1.49 percent late on July 13.

Retail sales estimates in the Bloomberg survey of 81 economists ranged from a decrease of 0.4 percent to a gain of 0.5 percent. Purchases last fell for three months or longer in July through December 2008.

‘Anemic’ Growth

“The economy in North America continues to be fragile as consumer confidence lags and job growth remains anemic,” Vernon Nagel, chairman and chief executive of Acuity Brands Inc. (AYI:US), a lighting-fixture maker, said during a July 2 earnings call. “We expect the macroeconomic environment for the balance of 2012 to continue to be influenced by external concerns, including fiscal and monetary policy in U.S and the European debt crisis.”

The International Monetary Fund today cut its 2013 global growth forecast as Europe’s crisis prolongs Spain’s recession and slows expansions in emerging markets from China to India. Growth worldwide will be 3.9 percent next year, less than the 4.1 percent estimate in April, the fund predicted in an update of its World Economic Outlook.

Nine of 13 major retail sales categories showed a decline last month, led by a 1.8 percent slump at gas stations that reflected declining fuel costs. Regular fuel in June averaged $3.49 a gallon, or 22 cents less than in May, according to AAA, the nation’s biggest motoring organization.

Department Stores

Spending decreased 0.7 percent at department stores, 0.8 percent at furniture outlets and 0.6 percent at motor vehicle and parts dealers. The drop in sales of furniture was the biggest in a year. Demand at building-material stores fell 1.6 percent.

Industry figures show retailers’ same-store sales slumped in June. Purchases at the more than 20 companies tracked by Retail Metrics Inc. increased 0.3 percent in June from the same time last year following a 4 percent gain in May.

Demand at Target rose 2.1 percent last month, falling short of the average projection for a 2.8 percent gain from analysts surveyed by Retail Metrics. Macy’s, the second-biggest U.S. department-store chain, posted a 1.2 percent increase compared with a 2.3 percent estimate.

Today’s figure on auto dealer sales contrasts with data from Ward’s Automotive Group, which reported that cars and light trucks sold at a 14.1 million annual rate in June, up from the 13.7 million pace in May that was weakest this year.

Consumer Spending

Consumer spending climbed at a 2.5 percent rate in the first quarter, according to Commerce Department data. Economists surveyed earlier this month before today’s data forecast it increased at a 1.9 percent rate from April to June while the economy as a whole expanded at a 1.8 percent pace.

A less optimistic consumer will probably restrain demand. The Thomson Reuters/University of Michigan preliminary sentiment index for July dropped to the lowest level this year as Americans grew more pessimistic about their finances, a report showed last week.

“People are just pulling back, and you’re not likely to see a significant pickup from here,” said Michael Carey, chief economist for North America at Credit Agricole CIB in New York. “This was certainly a slowdown from the first quarter.”

American employers added fewer workers to payrolls than forecast in June and the jobless rate stayed at 8.2 percent, a report from the Labor Department showed on July 6.

June Employment

The 80,000 gain in employment followed a 77,000 increase in May. Economists projected a 100,000 rise, according to the median estimate in a Bloomberg survey. Growth in private payrolls was the weakest in 10 months.

Some Federal Reserve policy makers said the central bank will probably need to take more action to boost the labor market and achieve its inflation goal, according to minutes of their June meeting.

“A few members expressed the view that further policy stimulus likely would be necessary to promote satisfactory growth in employment and to ensure that the inflation rate would be at the Committee’s goal,” according to the record of the Federal Open Market Committee’s June 19-20 gathering released July 11 in Washington.

Fed Chairman Ben S. Bernanke will address the outlook for the economy when he delivers his semi-annual monetary policy report to Congress tomorrow and July 18. He may hint at steps that can be taken to revive the expansion.

Excluding Vehicles

Purchases excluding autos decreased 0.4 percent, today’s retail sales report showed. They were projected to be unchanged, the survey median showed.

Sales excluding automobiles and service stations fell 0.2 percent, compared with a projected gain of 0.2 percent in the survey.

The retail sales category used to calculate gross domestic product, which excludes purchases at auto dealers, building material stores and service stations, decreased 0.1 percent after no change in the previous month.

Manufacturing may maintain its role as a bright spot for the economy. The Federal Reserve Bank of New York’s general economic index rose to 7.4 this month from 2.3 in June. The median forecast of 51 economists surveyed by Bloomberg called for an increase to 4.0. Readings greater than zero signal expansion in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.

Inventories increased 0.3 percent for a third month in May, Commerce Department data showed. The median forecast in a Bloomberg survey projected a 0.2 percent gain. Sales fell 0.1 percent in May for a second month.

Businesses had enough goods on hand to last 1.27 months at the current sales pace in May, up from 1.26 months in April and the highest in a year.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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Companies Mentioned

  • TGT
    (Target Corp)
    • $63.36 USD
    • -0.45
    • -0.71%
  • M
    (Macy's Inc)
    • $58.94 USD
    • -1.16
    • -1.97%
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