WASHINGTON: US 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 in part held back by a second straight month of declines in receipts at auto dealers. July's reading was the weakest since January.
Retail sales account for a third of consumer spending. Economists, who had forecast sales increasing 0.2 percent last month, expected a pick-up in the months ahead as the labor market continues to firm.
"Given the strong gains in labor market activity, along with other indications of strengthening domestic growth momentum, we expect this slowdown to be short-lived and we look for consumer spending to rebound strongly in the coming months," said Millan Mulraine, deputy chief economist at TD Securities in New York.
The economy has experienced six consecutive months of job growth above 200,000. With layoffs and job openings back to their pre-recession levels, further gains in employment are in the cards. Data on manufacturing and services sectors have suggested the economy was growing solidly.
Still, the pause in retail sales could give the Federal Reserve ammunition to maintain its very easy monetary policy stance for a while. The U.S. central bank has kept its benchmark overnight interest rate near zero since December 2008.
The dollar fell against the euro on the data, while prices for U.S. Treasury debt pared losses. U.S. stocks opened higher.
CORE SALES BARELY RISE
So-called core retail 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. 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.
"There is downside risk to our third-quarter growth estimate of 2.9 percent," said Jennifer, a senior economist at BMO Capital Markets in Toronto.
A second report on business inventories from the Commerce Department suggested the second-quarter growth estimate could be lowered. Retail inventories, excluding autos, which go into the calculation of GDP, gained 0.3 percent after being flat in May.
That was less than the government had assumed in the advance second-quarter GDP estimate published last month.
In July, receipts at auto dealerships fell 0.2 percent 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.
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