The US economy will struggle to regain speed in the second half of the year, new data on Thursday suggested, as the number of Americans filing for first-time jobless benefits remained high and retail sales barely rose in June. But a drop in energy costs, which caused wholesale prices to post their biggest fall last month in 1-1/2 years, could boost consumer spending and give the economy much needed impetus after growth faltered early in 2011.
--- Producer prices post largest decline in 1-1/2 years
Initial claims for state unemployment benefits fell 22,000 to 405,000 last week, the lowest since mid-April, the Labour Department said. Economists expected claims to drop to 415,000. Still, claims held above the 400,000 level usually associated with a stable labour market. Economists also cautioned against reading to much into the decline in jobless claims last week, which included the July 4 Independence Day holiday. Claims are volatile around this time of year because automakers normally shut plants for annual retooling.
There were fewer plant shut downs this year, however, after vehicle production was disrupted because of a shortage of parts from Japan in the aftermath of the March earthquake. Retail sales rose 0.1 percent as a rebound in receipts from auto dealers offset the biggest drop in gasoline receipts in a year, a Commerce Department report showed, after dipping 0.1 percent in May.
Economists had expected sales to slip 0.1 percent. Sales excluding gasoline rebounded 0.3 percent after declining 0.2 percent in May. Data last week showed employment growth stalled in June, with nonfarm payrolls growing by only 18,000 jobs and the unemployment rate rising to 9.2 percent.
The retail sales report suggested that growth in consumer spending in the April-June period would be less than the 2.2 percent annual pace in the first quarter. Another report from the Commerce Department showed business inventories were starting to pile up because of weak demand. Inventories increased 1 percent in both May and April. The Producer Price Index fell 0.4 percent, the steepest decline since February 2010, the Labour Department said in a second report, after a 0.2 percent rise in May.
That decline was mitigated by a 0.8 percent bounce back in motor vehicles receipts, indicating an easing in shortages related to supply chain disruptions from Japan. Motor vehicle sales declined 1.8 percent in May. Excluding autos, retail sales were flat last month, the weakest reading since last July, after rising 0.2 percent in May. Clothing store receipts rose 0.7 percent last month and sales at building materials and garden equipment suppliers increased 1.3 percent. Receipts at sporting goods, hobby, book and music stores fell 0.7 percent, however, while sales of electronics and appliances dipped 0.2 percent.