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Economy in Brief

U.S. Retail Spending Declines Unexpectedly
by Tom Moeller July 14, 2010

Consumers began the summer season on a cautious note. Retail sales unexpectedly fell 0.5% last month. To emphasize the notion of lost momentum, May's decline was revised to 1.1% from 1.2% but the gain in April sales was halved to 0.3%. The drop in June sales disappointed Consensus expectations for a 0.2% decline and for 2Q as a whole, retail sales rose 4.1% (AR), half the 1Q increase and the weakest of the last four quarters.

Much of the weakness in sales last month was due to a 2.3% decline in motor vehicles and parts purchases which owed to the 4.7% m/m decline in unit vehicle sales. Also, sales at gasoline service stations fell 2.0% (+8.8% y/y) as pump prices fell. The 0.1% slip in nonauto retail sales about matched Consensus expectations for a -0.0% reading. Excluding both auto and gasoline purchases, sales ticked 0.1% higher after a 1.0% May decline. For the quarter sales rose at a 3.8% annual rate, also half the 1Q gain and the weakest of the last three quarters. Last month's decline in retail sales again was paced by a 1.0% drop in sales at building materials & hardware stores which followed a 9.3% May shortfall.

"Core" discretionary spending also remained soft last month. A 0.6% gain (5.7% y/y) in apparel store sales recouped May's decline but the 4.1% advance for the quarter was down from the 13.9% 1Q gain. General merchandise store sales ticked up 0.2% (2.6% y/y) last month but for the quarter sales declined at a 1.9% annual rate. Finally, sales of furniture, home furnishings & electronics rose 0.2% (4.6% y/y) during June but for the quarter fell at a 0.1% rate after an 11.4% 1Q gain. Furniture sales alone fell hard for the third straight month. The 1.1% decline (+1.7% y/y) was accompanied by a 1.3% increase (7.3% y/y) in sales of electronics & appliances. Sales by internet & catalogue vendors rose 1.0% (12.1% y/y) and May sales were revised sharply higher. Food service sales ticked 0.2% higher (2.8% y/y) after two months of slight decline.

The retail sales data are available in Haver's USECON database.

June May April June y/y 2009 2008 2007
Total Retail Sales & Food Services (%) -0.5 -1.1 0.3 4.8 -6.3 -1.0 3.3
     Motor Vehicle & Parts -2.3 -0.6 0.5 6.8 -12.0 -13.9 0.8
  Retail Sales excluding Autos -0.1 -1.2 0.3 4.4 -5.1 2.3 3.9
     Gasoline -2.0 -2.5 0.1 8.8 -24.8 9.9 6.8
  Non-Auto Sales Less Gasoline 0.1 -1.0 0.3 3.9 -1.9 1.2 3.5
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