TOPICS > Economy

U.S. Retail Sales Sink After 2 Months of Gains

BY Dave Gustafson   August 13, 2009 at 10:44 AM EST

Shoppers at a mall; file photo

The Commerce Department reported Thursday that retail sales fell 0.1 percent last month. Economists forecast a 0.7 percent gain after sales figures increased 0.8 percent in June.

Excluding auto sales, purchases fell 0.6 percent, also more than anticipated. The ‘clunkers’ program, which got a $2 billion extension from Congress, may have a more profound impact on the August salesdroppe numbers.

“Retail sales were unexpectedly weaker than expected, suggesting that the money spent on the ‘Cash for Clunkers’ plan wasn’t spent on other things,” Peter Boockvar, equity strategist at Miller Tabak & Co in New York, told Reuters.

“The claims data shows that the labor market, while improving, remains difficult. People are still losing jobs. Less bad doesn’t mean good. It’s still tough, and it’s a wake-up call.”

While auto sales showed a 2.4 percent jump — the biggest in six months — there was widespread weakness elsewhere. Gas stations, department stores, electronics outlets and furniture stores all reported declines.

Gas station sales plunged 2.1 percent, due more to falling pump prices than weak demand. Excluding gas station sales, the retail figures would have posted a modest 0.1 percent increase.

Department store sales fell 1.6 percent and the broader category of general merchandise stores, which includes big chains such as Wal-Mart and Target, posted a decline of 0.8 percent.

In another sign of weak consumer demand, retail giant Wal-Mart reported roughly flat second-quarter profits and a dip in sales. It exceeded some analysts’ estimates after managing inventory to lower costs. Comparable-store sales trailed the company’s forecast.

The world’s largest retailer posted $3.4 billion in second quarter earnings that were similar to the same period last year even though sales at its stores that have been open more than a year fell 1.2 percent in the last quarter.

“They are providing great value to the consumer, but the consumer is very stressed these days,” Craig Johnson, president of retail-consulting firm Customer Growth Partners LLC in Connecticut, told Bloomberg Television.

Macy’s, the second-largest U.S. department store group, said Wednesday it cut inventories 7.5 percent in the second quarter from a year ago as sales dropped. The retail sales numbers cast a shadow over an anticipated rebound in consumer spending in the current quarter. Spending, which accounts for over two-thirds of U.S. economic activity, has been pressured by high unemployment.