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Weak retail sales point to slowdown in consumer spending

Weak retail sales point to slowdown in consumer spending

RETAIL: The Commerce Department said on Wednesday retail sales, which had increased 0.2 percent in June, were held back by a second straight month of declines in receipts at auto dealers, as well as weak sales of furniture and electronics and appliances. Photo: Reuters

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales unexpectedly stalled in July, pointing to some loss of momentum in the economy early in the third quarter.

The Commerce Department said on Wednesday retail sales, which had increased 0.2 percent in June, were held back by a second straight month of declines in receipts at auto dealers, as well as weak sales of furniture and electronics and appliances.

July’s reading was the weakest since January. Economists had forecast retail sales, which account for a third of consumer spending, increasing 0.2 percent last month.

The weak sales report, which is at odds with data on employment, manufacturing and services sectors that have suggested the economy was growing solidly, could see the Federal Reserve in no rush to start raising interest rates.

“The Fed is focused on justifying its easy monetary policy. This gives them more ammunition that things are not as strong as some economists say,” said Craig Dismuke, chief economist at Vining Sparks in Memphis, Tennessee.

The U.S. central bank has kept its benchmark overnight interest rate near zero since December 2008, citing weak wage growth among other concerns.

The dollar extended losses against the euro on the data, while prices for U.S. Treasury debt pared losses. U.S. stock index futures were trading slightly up.

So-called core sales, which strip out automobiles, gasoline, building materials and food services, and correspond most closely with the consumer spending component of gross domestic product, edged up 0.1 percent in July.

That suggested a moderation in consumer spending early in the third quarter. Sluggish wage growth is likely constraining retail sales.

Core sales rose 0.5 percent in June. The retail sales report, which was generally weak, suggested third-quarter growth will probably pull back after the April-June quarter’s brisk 4.0 percent annualized rate.

Receipts at auto dealerships fell 0.2 percent in July after declining 0.3 percent the prior month. Sales at non-store retailers, which include online sales, slipped 0.1 percent.

Sales at clothing retailers rose 0.4 percent and receipts at sporting goods shops gained 0.2 percent.

Sales at electronics and appliances stores fell 0.1 percent, while receipts at building materials and garden equipment suppliers rose 0.2 percent.

(Reporting by Lucia Mutikani; Additional reporting by Richard Leong in New York; Editing by Andrea Ricci)

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